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Page 4 of 8
Common VAT Problems
3. Discounts and Part Exchange
3.1 Discounts can be problematic. The VAT payable on a supply depends on how the discount is offered.
- If an unconditional discount (such as a trade discount) is given, the VAT is based on the discounted value of the full sale.
- The same applies for prompt payment discounts - even if the customer does not pay promptly.
3.2 VAT is calculated on the full value of any part-exchange or barter transactions.
- VAT must be calculated as if the transaction had been entirely for cash (ie purchases and sales at the full price). VAT invoices must be issued accordingly.
Labels: Tax, Reduce Costs
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