Current Treatment

For many years, if a prompt payment discount was offered, VAT was due on the discounted price, whether or not the discount was received (VATA 1994, Sch. 6, para. 4). This was a marginal benefit for any customer not able to recover all VAT charged.

The current treatment, which has applied for all supplies since 1 April 2015 (and since 1 May 2014 for telecommunication and broadcasting services), is that if a supplier offers a prompt payment discount and the customer receives the prompt payment discount then VAT is accounted for based upon the consideration actually received.

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