Hi, my client is cash accounting, so obviously pay vat on payments. However we had a supplier invoice offering discount. I entered the invoice in full on sage, then when we came to pay, I entered the discount on the payment screen then the rest of the invoice that we paid. I assumed that sage would only only calculate the vat on the payment (therefore less than the vat on the invoice) However we have now received a credit note for the vat on the discount from the supplier, and when I looked into it, I realised that sage has claimed the invoice vat on the payment and not a reduced amount.
Is there a way to make sage calculate the vat on the payment when discounts are involved or should I be dealing with it all differently?
I really hope that somebody understands what I mean.
Thanks for reading
-- Edited by Shamus on Friday 31st of July 2015 12:15:09 PM
I'm going to deal with only the simplest scenario in what follows and leave it to you to come back to say how much more complicated your position is. I'm assuming goods to the value of £100 with a 10% settlement discount. Using dummy figures: I think you've described an invoice for £120, recorded as £100 Net and £20 VAT; discount of £12; and a payment of £108 (in Sage the payment will have £20 VAT recorded against it - hence what you see in the VAT return).
File > Maintenance > Corrections - delete the discount transaction for £12. Now the invoice has £12 outstanding.
Process the £12 credit note. Discount code £10 and VAT £2.
Allocate the credit note against the invoice to clear the invoice using the wizard.
File > Maintenance > Corrections - edit payment to record the correct figures of £90 Net and £18 VAT.
So far as how you should deal with it, I'd be inclined to omit the discount entry when you're making the payment of £108. That records £90 Net and £18 VAT against the payment when you make it - which is what you need on your tax return. That leaves £12 outstanding on the supplier account as an aide memoire for the fact that a credit note for £10 discount and £2 VAT is owed. I suppose I'd think of it as you not anticipating the award of discount but waiting until they confirm it with the credit note. If they never send you the credit note you'd have to pay them another £12 (which Sage would record as £10 Net and £2 VAT) to clear the account.
I thought there'd be more on this subject when I posted http://www.book-keepers.org.uk/t59398711/prompt-payment-discount-vat-change/ but I hadn't thought about cash basis accounting at all at that time.
