Running the Sage VAT wizard is giving me what I know to be the correct Purchase VAT amount to reclaim in Box 4. So I should just relax! However my Box 7 result for total value of purchases is giving a value that is too big by exactly the amount sitting as a credit in my Discounts Taken nominal code.
I have only made a couple of orders using the discount procedure on Sage so it is very likely that I did that wrong somehow.
Does anyone have any advice as to what should I do to correct this situation, and what I am doing wrong in the ordering procedure?
It does not seem right to me that the total for purchases should not include the discount; what we actually paid was the discounted sum.
If you look at section 19.8 of VAT Notice 700 ("Recording supplies you receive and working out your input tax"), it says in 19.8.1 (c):
The VAT-exclusive value of all supplies you have received. This includes goods you have imported or removed from warehouse and any of the services which you have received from abroad which are supplied in the UK. You should not make any deduction for cash discounts but you should deduct all credits you received from suppliers in the tax period.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
Gosh, I didn't know that... and I must say it still seems a strange way of calculating it. But ours not to reason why, ours but to fill in Box 7 however HMRC want it done!
