Sales cash settlement discount incorrectly calculated (UK)

When testing our cash settlement discounts given to customers I notice that when matching the cash received (with customer having taken the discount) with the invoice (FB05) the discount in being overstated.

In the UK, the VAT applied to the invoice should be calculated after the cash discount is deducted. e.g. for 20% VAT and a 10% cash discount:

If my item is £100, then the VAT is £18 (20% of £90 (100-10)) making the invoice total £118.

I would be expecting the customer to pay £108 (£120 less 10% or £118 less 10% of £100), an 8.5% discount on the invoice total (inc VAT), since the VAT is already discounted.

However FB05 is calculating a 10% discount on £118 (£1.18), so expecting £106.20, which is taking a double discount on the VAT.

Any ideas what is causing this and how to rectify?

Thanks

Ben