4 April 2015    |    Taxation, Technology

New VAT rules on customer discounts

New VAT rules on customer discounts

Prompt payment discount and VATNew rules on prompt payments came into effect on 1 April 2015.  New rules apply to the VAT treatment of prompt payment discounts (PPDs). VAT can only be reduced to reflect the discounted price if the customer pays within the discount period. Previously it applied whether or not the customer paid on time.

Changes to your invoicing.

There are two recommended Ways to handle the new rule when you bill a customer. You can either issue an invoice showing:


If you offer discounts to customers who pay promptly VAT is now worked out on the full price unless they actually pay on time. lt’s recommended that invoices now show full terms of the discount and a note saying that the customer can only reclaim the amount of VAT they actually pay.

If you need more advice or help with updating your computer software, then please contact Sue.

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