Unfortunately, the UK VAT legislation is misaligned with EU VAT legislation in respect of prompt payment discounts. Therefore, with effect from April 2015 VAT will need to be accounted for on the full invoice amount.
If the client does subsequently take up the discount, a credit note carrying VAT should be issued or you should display on the original invoice what entries the client should make to their records for the discount.
Please note, it will apply from the earlier date of 1st May 2014 for supplies of telecommunications and broadcasting services where there is no obligation to provide a tax invoice.
If you would like any advice on invoicing or VAT, please feel free to contact us and we can put you in touch with your local TaxAssist Accountants office.
By Jo Nockels
Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.