Commentary

RCB/8/07 VAT—manufacturers' “cash back” payments

Part V16 Forms and other HMRC material

RCB/8/07 VAT—manufacturers' “cash back” payments

RCB/8/07 VAT—manufacturers' “cash back” payments

Revenue & Customs Brief, Issue 8. 6 February 2007

This Revenue & Customs Brief article explains the VAT treatment of “cash backs” and what businesses should do if they pay or receive “cash backs”, or have paid or received them in the past.

Background

The term “cash back” refers to a payment usually made by a manufacturer directly (or via a recovery agency) to the customer of a wholesaler or retailer – mostly in recognition of the volume of purchases. Similar payments may also be made under manufacturers' discount schemes, or may be referred to as volume bonuses or described in similar terms. Such payments occur outside the direct supply chain and as a result credit notes should not be used.

HMRC has become aware that some businesses have been accounting for “cash back” payments incorrectly. Some manufacturers have reduced their output tax, some have

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial