Prompt Payment Discount

7th Tuesday, 2015  |  News  |   no comments

From 1 April 2015, when processing an invoice, VAT will be calculated on the goods value before any prompt payment discount is applied. This change will affect any business that either receives or gives prompt payment discount for prompt payment of an invoice. When the legislation change becomes effective, HMRC must receive the full value of VAT on an invoice if the settlement discount is offered but not taken. Any unbilled sales orders posted before 1 April 2015 require billing from that date under the new rules.


Please note that unbilled SOP quotes, orders etc. will require editing in order to recalculate the VAT on the lines. Progressing and selecting ‘No’ to the edit prompt will not recalculate the lines. If this is done a VAT only invoice will be required. If the Prompt Payment Discount is taken, an accounting adjustment will need to be made to post the discount and to adjust both the goods and VAT values on the VAT Return. In Opera 3 and Opera II this must be done by a credit note posting.


Invoices that offer Prompt Payment Discount, dated before 1 April 2015 must be processed under the old rules. Any receipts received that do take advantage of the discount will not require accounting for under the new rules. You may want to consider billing all relevant outstanding quotes before the new rules apply. If you change quotes or orders on or after 1 April 2015, the VAT will be recalculated using the new rules and will not be the same as the original value.

For more information, please read the full guide