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VAT on wholesale or trade discount

Discussion in 'Accounts & Finance' started by Munchkette, Mar 7, 2018.

  1. Munchkette

    Munchkette UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    I've just started up as a sole trader, I have not registered for VAT as I'm no where near the threshold therefore I cannot claim back VAT charged on purchases from suppliers which is fine by me.

    I am just wondering whether I'm being overcharged VAT by a supplier. They offer a 50% discount for wholesale buyers. The 50% discount is applied to the RRP (inclusive of VAT) then 20% VAT is added to the total invoice amount.

    Example RRP (including VAT) £53, Discounted price £26.50, Final price (incl VAT) £31.80

    However am I right in thinking the discount should be applied to the RRP net of VAT? Therefore the discounted price of £26.50 should be the final value I pay as this already includes VAT and not £31.80?

    By my calculation the net RRP (excluding VAT) is £44.17, applying 50% discount to this gives £22.09
    Final price (incl VAT) is therefore £26.51 or pretty much £26.50
    The VAT due being £4.42
    Posted: Mar 7, 2018 By: Munchkette Member since: Mar 7, 2018
  2. Toby Willows

    Toby Willows UKBF Regular Free Member

    Posts: 497 Likes: 114
    They can discount however they want, as long as vat is charged on the invoice total it’s up to them how they arrive at the net figure.
    Posted: Mar 7, 2018 By: Toby Willows Member since: Jun 20, 2016
  3. TheCyclingProgrammer

    TheCyclingProgrammer UKBF Regular Free Member

    Posts: 817 Likes: 176
    As above, it's up to them how they discount it but to answer your question, yes I would expect 50% off to mean 50% off, which means the net discounted value is half of the net value.
    Posted: Mar 7, 2018 By: TheCyclingProgrammer Member since: Jul 15, 2014