VAT: Prompt payment discounts
John Nuth - Friday, January 09, 2015
From 1 April 2015, businesses will be required to account for VAT on the actual consideration received after prompt payment discounts are offered.
This change will apply to all supplies of goods or services. Businesses will be required to pay more VAT where conditional discounts are offered to encourage early payment, but the discount is not earned.
It is expected that suppliers will be required to account for VAT on the non-discounted value, only adjusting the VAT if the prompt payment discount is taken up and a lower price is accepted in full payment.
This change widens the policy already announced in the Budget on 19 March 2014, which applied only to telecommunication and broadcasting services. HMRC issued a consultation on 17 June 2014 regarding this change and expects to publish its reaction shortly. If this affects you, watch this space.
