Consultation on VAT prompt payment discounts

HMRC is to consult on proposed changes to UK legislation relating to VAT prompt payment discounts which will take effect in relation to supplies made on or after 1 April 2015.

From that date, the way many businesses account for VAT when offering prompt payment discounts will change. Currently businesses can issue invoices that give details of the amount of the prompt payment discount and its terms and show the VAT due calculated on the discounted price.

Up until now, if the discount is not taken up HMRC has not required businesses to alter the amount of VAT invoiced and accounted for. After the change, businesses will be required to account for VAT on the consideration they actually receive.

HMRC says it would like to receive views or suggestions on how the businesses affected should make consequent accounting adjustments, which will be used to inform any guidance HMRC may issue.

The deadline for comment is 9 September 2014 and feedback should be sent to: edward.fosbrook@hmrc.gsi.gov.uk.

More details on the proposals are here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/320780/VAT_prompt_payment_consultation.pdf

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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