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Tax Tip

Changes to the VAT rules regarding prompt payment discounts.

HMRC have announced changes to the VAT rules regarding prompt payment discounts.

The VAT rules for prompt payment discounts are such that if you offer a prompt payment discount and the customer does not pay promptly (and therefore pays the higher amount) you only need to account for VAT on the discounted amount.

This method of discounting can therefore be particularly advantageous if you are supplying goods or services to notoriously slow payers.

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“HMRC has identified that there has been an increase in using prompt payment discounts in situations where customers are unable to recover VAT. They have identified that where the payments are not made promptly there is a loss to the Revenue - estimated to be £3.5M. Therefore the current VAT rules for prompt payment discounts will be changed so that VAT will always be accounted for on the amount received.”

The changes will come into effect for supplies of telecommunication and broadcasting services where there is no obligation to provide a VAT invoice on 1 May 2014, and for all other supplies - the measure will have effect for supplies made on and after 1 April 2015

If you have any questions regarding this change or any other VAT issues, please do not hesitate to contact us at ABDS.


ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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Great with people  
Clear and precise with advice
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In touch with issues that face our clients
Mindful of our client’s long term strategic goals

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