Revenue and Customs Brief 49 (2014): VAT - Prompt Payment Discounts
Associated Weavers has implemented this guideline for the UK starting 1 April 2015.
This brief provides guidance on what to do when you receive a VAT invoice offering a Prompt Payment Discounts from the 1 April 2015.
The invoices of Associated Weavers are displaying a net amount (value), a VAT amount and a Total amount. (bottom right of the invoice)
These amounts are applicable if you are not offered a cash discount or your payment has not been made by the date applicable for your payment term.
Each of the amounts may be lowered by the cash discount (PPD) percentage offered in case your payment has been made by the date applicable for your payment term.
Example Invoice:
Value : 100 GBP
VAT (20%) : 20 GBP
Total : 120 GBP => Pay this amount if no PPD is offered, or you pay later than the payment term.
Example : PPD 2,5% till 20th of next month.
Discounted value : 97.5 GBP
Discounted VAT (20%) : 19.5 GBP
Discounted Total : 117 GBP => Pay this amount before the 20th of next month if PPD of 2,5% is offered.
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Reference is made to the official HM Revenue and Customs Brief which can be found here