VAT on Customer Rebates

[minnehoma]

We currently have 2 ways of paying rebates to our customers, the first is by credit note which is our preferred method and the other is by cheque payment.

My question is should the cheque payment include vat?

When we raise a credit note we include the vat but we have had a customer who has queried if the vat should be included in the cheque payment, we currently do but they have claimed that we shouldn't.

 

[STDFR33]

What do you do and what is the rebate for?

 

[minnehoma]

We sell hardware to the building industry and the rebate is against invoiced sales for this hardware.

 

[lesvatadvice]

I would expect that the payment is effectively a retrospective discount, and therefore subject to VAT. But that does depend on the wording of your sales contracts, and the conditions for the rebate.
You should also check HMRC Notice 700, para 19.9 'Debit Notes' which may apply to you.