Budget 2014 – VAT

There were no changes announced to the rate of VAT.

The VAT registration and de-registration limits have been increased with effect from 1 April 2014 to £81,000 and £79,000 respectively

Prompt payment discounts

From 1 April 2015, businesses will have to account for VAT on prompt payment discounts.

Currently, no VAT is charged on the discount, even if the customer pays the full amount.

Comment: Say business invoices £1,000 plus VAT with a 10% early settlement discount offered.

Under the current rules, the invoice would be for £1,180 (£1,000 plus VAT on the amount due after the discount).

Under the new rules, the invoice would be for £1,200 – £1,000 plus VAT on the whole amount at 20%.

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