Can anyone tell me if "discount allowed" is zero rated or exempt for the VAT return. Or is it outwith the scope of VAT altogether? I've searched on the net and hmrc itself but can't find an answer.
Do you mean an early settlement discount? If so then they are worked out (or should be) with the vat already taken out. You work the vat on the reduced net in other words, so if you take the discount the vat will be already be for the reduced amount.
eg
net £100
early settlement discount 10%
= £90
Therefore vat would be 90*20%
= £18
Gross £118 (full net plus vat on reduced amount)
Instead of £120 (full net plus vat on full amount).
Yes early settlement discount. I mean after the invoice has been calculated and the customer takes the discount. You then have an amount of "discount allowed" in the direct expenses. Should this amount be included in box 7 of the VAT return.
Yes, these are the kind of things I never thought about until I actually got my first client. I think I'm starting to think to deeply about things and creating problems where there aren't any.
