Prompt payment discount and VAT

reg091

Not sure if this is the correct forum but here goes. Had some work done on the house and the invoice offers a 2.5% discount if paid within 7 days. This figure is calculated from the pre-vat amount. But I am still expected to pay the full vat amount calculated as if there were no discount applied. This doesn't seem right to me.

Found some HMRC guidance for businesses which seems to suggest that the customer (me) has to recover the overpaid VAT through their VAT account. Well, I am not registered for VAT so that can't apply.

Any ideas?

Risteard

When I pay the wholesalers I have a 2.5% discount for prompt payment. Obviously I only pay the VAT on the final amount paid and not the initial (100%) amount.

reg091

You say "obviously" you only pay the VAT on the final amount paid which is entirely my point. I don't have that option I can pay the discounted price for the goods supplied but the VAT amount is on the non-discounted price.

This can't be right.

Risteard

reg091 wrote: »

You say "obviously" you only pay the VAT on the final amount paid which is entirely my point. I don't have that option I can pay the discounted price for the goods supplied but the VAT amount is on the non-discounted price.

This can't be right.

That's what I'm saying. It is illegal for them to charge VAT over and above the amount being paid. I would ask them to clarify this urgently.

reg091

"clarification" is: "The reason the discount is calculated on the pre-vat figure is because we have to submit our invoices for the VAT without discount, unfortunately the tax man doesn’t want to give discount too!."

Which still doesn't make sense to me. Basically HMRC is making money on the deal, from me!

Risteard

reg091 wrote: »

"clarification" is: "The reason the discount is calculated on the pre-vat figure is because we have to submit our invoices for the VAT without discount, unfortunately the tax man doesn’t want to give discount too!."

Which still doesn't make sense to me. Basically HMRC is making money on the deal, from me!

You're right that it doesn't make sense. The taxman isn't giving a discount - he's getting VAT on the amount paid. What they are paid for the work isn't particularly any of the VAT man's business (aside from the fact that he's entitled to be paid the VAT on it).

Tom99

[FONT=Verdana, sans-serif]You are not being offered a 2.5% discount then.[/FONT]
[FONT=Verdana, sans-serif]If you pay less then the suppliers VAT bill will be less.[/FONT]
[FONT=Verdana, sans-serif]If they keep the VAT the same they are pocketing the difference.[/FONT]