HMRC Guidance on VAT and prompt payment discounts

HMRC have published Revenue and Customs Brief  49/14 in respect of suppliers and customer issuing or receiving VAT invoices that offer a prompt payment discount after 1 April 2015. At present, suppliers offering a prompt payment discount are able to account for the VAT on the discounted price, even if the prompt payment discount is not taken up by the customer. Following the change, suppliers must now account for VAT on the amount actually received. The change took effect from 1 May 2014 for supplies of broadcasting and telecommunication services where there is no obligation to provide a VAT invoice; for other supplies, the change takes effect on 1 April 2015. If suppliers do not wish to issue credit notes, certain information must be included on the invoice, including the terms of the prompt payment discount and a statement that the customer can only recover as input tax the VAT paid to the supplier.

Please contact our free helpline to discuss the implications and how this change may affect your clients.

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