A supplier provides invoices that include input VAT for the purchase tools. However, these invoices do not require paying. The supplier has a scheme where you build up points from every purchase made and these points can be used to purchase tools. If my client enters the invoice on their purchase ledger to claim back the VAT, how would they pay it off?
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The entry to clear the purchase ledger balance should be posted against discounts received or similar.
One way would be to enter the invoice, then raise a credit note to offset it. VAT on the credit note should be the same as on the invoice, as it is in substance a discount, and such things are vat-able. The net CR entry of the C/N should be to discounts received or direct costs. Alternatively, just don't enter the invoice at all.
Thanks for the replies. So the 'discount' would include VAT and therefore effectively cancel out the invoice. Probably easiest to do as Truthsayer suggested and not enter these invoices.
