Skip to Content
Former Member
Mar 11, 2013 at 05:25 PM

VAT on Early Settlement Discounts



Hope someone can help or suggest some solutions!

We offer a customer 2.5% early settlement discount. They always pay early and take the discount.

As per HMRC on our invoices we have to show the following to the customer to whom we offer an early settlement discount:

Invoice amount - £1000

VAT amount - £195 (this VAT is based on 20% of £975 – which is £1000 less 2.5%)

Invoice Total - £1195

We have to charge Vat on the discounted invoice amount whether or not the customer takes the early settlement discount.

How can we implement this in SAP so that is does not mess up our VAT returns and we do not want to set up a new VAT code as it is not a discounted VAT rate but 20% on the discounted net amount. Is this through the invoice template and if so what would the formula be in the VAT field.

Many thanks