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Reporting VAT on sales rebates

Reporting VAT on sales rebates

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When a customer sends an invoice for a sales rebate, should this be accounted for as input VAT? 
Or should it be offset to reduce sales output VAT?
Seems like a simple one but I thought it would be worthwhile checking :)

Replies (6)

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Hallerud at Easter
By DJKL
03rd Oct 2019 17:12

I suspect it depends on the conditions required for the rebate to be paid.

If it is merely say pricing reduction for volume purchased I think I would be treating as discounts given, reducing sales, and treating as negative output tax, if there is more performance/behaviour conditions I think I would more treat as a cost and the vat as input vat.

To tell you the truth have not really dealt with this sort of thing for years, perhaps someone with more experience may comment.

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Replying to DJKL:
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By clare2904
03rd Oct 2019 17:36

Thank you. I think the fact they raise the invoice suggests it should be output VAT but the fact that it is posted to sales is confusing me. I will probably try to contact HMRC for guidance on this!

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Replying to clare2904:
RLI
By lionofludesch
04th Oct 2019 10:16

clare2904 wrote:

Thank you. I think the fact they raise the invoice suggests it should be output VAT but the fact that it is posted to sales is confusing me. I will probably try to contact HMRC for guidance on this!

Seriously ?

They're not accountants. They won't know.

Stick with your gut feeling.

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Replying to lionofludesch:
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By clare2904
04th Oct 2019 10:37

They may not be accountants but they are the ones who impose penalties and fines for mistakes on returns, so if I can get anything in writing from them confirming the correct treatment the company would be covered. I may not be able to get this but worth a try.

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Replying to clare2904:
RLI
By lionofludesch
04th Oct 2019 11:35

clare2904 wrote:

They may not be accountants but they are the ones who impose penalties and fines for mistakes on returns, so if I can get anything in writing from them confirming the correct treatment the company would be covered. I may not be able to get this but worth a try.

Good luck with that.

Personally, I would say that, if the customer is invoicing you, it's your input tax.

If you're giving the customer a credit note, it's your output tax.

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By Cloudcounter
04th Oct 2019 10:04

How to you propose to treat this in the accounts? It seems to me that if you net it off against sales, then it's a reduction of output tax. If you show it as a cost, then it's input tax.

On the limited information provided, I'd tend towards the former.

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