As of 1 April 2015 the HMRC are implementing a major change to the treatment of VAT for invoices that have settlement discount on them. This will affect anyone offering settlement discount to customers or receiving settlement discount from suppliers.
Currently businesses can issue invoices that give details of the amount of the Prompt Payment Discount (PPD) and its terms and show the VAT due calculated on the discounted price. If the discount is not taken up, HMRC does not require businesses to alter the amount of VAT invoiced and accounted for.
From 1 April 2015, businesses will have to charge VAT on the full invoice price (goods amount), as opposed to the discounted price where settlement applies.
Subsequent adjustments will then be required to adjust VAT where a customer takes up a prompt payment discount that has been offered by either:
Issuing a Credit Note for the discount plus VAT
Including a statement on the invoice to the customer that they can only recover as input tax the VAT paid to the Supplier and adjust the VAT in your system
Full details of the VAT Prompt Payment Consultation can be found at
http://www.gov.uk/government/consultations/vat-prompt-payment-discounts and also see the guidelines at https://www.gov.uk/government/publications/revenue-and-customs-brief-49-2014-vat-prompt-payment-discounts?dm_i=1ZBQ,379H6,DT6T79,BGR4J,1
How does this affect you and Encore?
If you offer settlement discounts to your customers or are offered settlement discounts by your suppliers then you may need an update to your package to incorporate this change
We are asking all customers if they could update us with the following information as is applicable to your company so the correct updates can be sent and applied.
If you are unsure please pass this email to the relevant person in your company who can answer this query.
1. You offer Settlement discount to your customers
2. You receive Supplier invoices that offer settlement discount that you regularly take advantage of
3. You receive Supplier invoices that offer settlement discount but you do not generally take advantage of
4. You do not have any involvement in Settlement discounts
*Please note if you do not currently have any Encore Maintenance you will need to renew before any updates can be sent
Emails can be sent to firstname.lastname@example.org