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Changes in Accounting for VAT on Payment Terms

Changes in Accounting for VAT on Payment Terms

UK VAT legislation on prompt payment discounts (PPD) will be aligned with EU VAT legislation.

 The government has made changes to the way VAT registered persons and companies account for VAT where they offer or take payment discounts (PPD). The current process will be amended to align with the Principal VAT Directive (PVD) which requires VAT to be accounted for on the consideration actually received and was introduced in the Finance Bill 2014. Further information is available from the HMRC Website.

This blog explains the change and how to treat it using Microsoft Dynamics NAV® 2013 and all earlier versions of Dynamics NAV.

Currently, you only need to account for VAT on the amount of your sales net of payment discount.

For example:

Sales Amount net of VAT:                     £100.00

10% prompt payment

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