VAT on Prompt Payment Discounts

New Rules
Businesses must account for VAT on the consideration they actually receive. Suppliers must invoice the full amount before discount and customers account for the amount of VAT that they pay. See Revenue Brief 19/2014.

Old Rules
Businesses could issue invoices providing the details of the amount of any prompt payment discount, the terms and VAT due calculated on the discounted price. If the discount is not taken up HMRC has not required businesses to alter the amount of VAT invoiced and accounted for.