Up to 1 April 2015 the ‘old’ rule applies, whereby the VAT amount is fixed by reference to the discounted value, whether or not the discount is taken up.

From then on the VAT charge must be calculated on the net value actually paid. The VAT cannot thus be a lower ratio of the true net price than would normally be the case.

The apparent purpose of the old approach was to allow a supplier to issue an invoice which remained accurate irrespective of the take up of the discount. This is now thought to be an incorrect interpretation of general VAT law (a fair point).