Bank Customer Receipt Discount uses T9 code

[eNote]

I am working with a very old Sage v5.02 Financial Controller.

When receiving a customer payment the discount I apply makes the total received ok but the amount in discount control has a VAT code of T9 and the VAT element of the discount is not being applied.

VAT return box 6 is correct but box 1 still has the original VAT value which should be lower.

Should I be doing something in the customers account to remedy this?

Anybody any ideas?

[brucedenney]

When doing early payment discounts, the VAT is calculated on the discounted amount.

In essence it is as if you are not doing an early payment discount, but are doing a late payment interest charge.

[eNote]

>When doing early payment discounts, the VAT is calculated on the discounted amount.

I think I understand what you are saying?

The invoice is for a stock item that has no discounts set. The invoice payment is processed in the bank form customers facility and the discount is applied there.

I would have expected to see a debit in the vat control related to the discount value with the net amount appearing in discount control. What IS happening is that whole discount including its VAT element appears in discount control.

Is there a better way to apply ahoc discounts?

[brucedenney]

Scratch what I said about early payment discounts, this is not what you are doing.


The legal VAT document that relates to this is the INVOICE. The amount of VAT is stated on that and is FIXED.

If you give a discount on this and it is significant, then really you have invoiced the wrong amount and you need to issue a credit note.

[eNote]

Yes I agree and I would normally do this for large amounts. Its ok for very small amounts where rounding errors have occurred, a penny for example.

What I cannot get my head around is how this version allows the discount to take place at all without accounting for VAT. There is no way to assign a VAT code to such discounts they are automatically T9.

Do you happen to know whether this behaviour is the same in later versions and why it is allowed?

[brucedenney]

It would be illegal to adjust the VAT.

ALL versions of ALL accounting systems should behave in this way.

The VAT amount is the amount on the invoice.

If you adjusted the VAT and the other party to the Invoice did not then you would be committing a VAT fraud.

[eNote]

>It would be illegal to adjust the VAT.

I agree, so why did Sage provide the feature?

[brucedenney]

Sage allows you to alter the VAT in order to correct a data entry error.

[eNote]

>Sage allows you to alter the VAT in order to correct a data entry error.

Accepted! So why does it apply the discount as a T9 0% in VAT control when all invoice line items have a T1 17.5% VAT element.

[brucedenney]

Because the VAT amount was fixed on the original invoice.
The giving/taking of discount can not alter the amount of VAT written on the bit of paper.