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dsavickij


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VAT confusion
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Hi, I just started studying accounts and I am confused about VAT

As i understand VAT is charged on the net amount if an early payment discount is given, so if 5% dicount is given on £100 order the VAT is only charged on £95 even if the payment is received after the early payment date.

 

I understand all that but surely  a company could just say 99% discount for early repayment. the make the early repayment time 1 minute or 1 day ( and agree with the company buying the goods that they pay after the early repayment period) and then the VAT will only be charged on 1%?  or are there some other rules that I havent seen yet?



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Peasie


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It won't be as simple as that. A fuller read of the VAT regulations will specify what is and what isn't allowed.

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Wella


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I would suspect it would fall foul of VAT fraud

VATF62200 - Contrivance, seems to be a pretty open ended guide that looks for deliberate trading conditions to reduce VAT liability. It doesn't mention the scenario you have given but I expect it would be covered somewhere in the text.

http://www.hmrc.gov.uk/manuals/vatfmanual/VATF62200.htm

 

HTH

Bill



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Spamkebab


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When i studied Computerised Accounts i came across the early settlement discount scenario. I thought surely theres a loophole here for less payment of VAT, my second thought was, if there was a loophole HMRC will have plugged it quick. HMRC maybe slow to give money but they are on the ball when it comes to collecting it.

 

Had to EDIT as i left the 'o' out of discount lol.



-- Edited by Spamkebab on Saturday 24th of September 2011 10:33:05 AM

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Peasie


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Spamkebab wrote:

Had to EDIT as i left the 'o' out of discount lol.

 Some forums might have censored the word - like Scunthorpe is sometimes censored.



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