39. General provisions on consideration

Summary

This section deals with general provisions on consideration. It sets out what the taxable amount should be when the actual consideration was more than the price that was agreed. It also provides for relief when the consideration is adjusted downwards – because (say) a discount is given.

Details

(1) Where the amount actually received exceeds the consideration referable to a particular supply, tax is payable on the amount received.

(2) Subsection (2) provides for the granting of relief in cases other than those covered by the determination rules in section 38 where the amount received is less than the full consideration, and there is a genuine business reason such as special offers, discounts allowed, bad debts, etc. The detailed procedures are set out in Regulations 9 and 10 of the VAT Regulations 2010.

(3) However, relief under subsection (2) does not apply in relation to the taxable letting of immovable goods – see section 95.

(4) Also, relief under subsection (2) will not be given where a supplier allows a reduction or discount in the amount of the consideration for the supply until the supplier issues a proper VAT credit note to the customer – see section 67(1)(b).

Example: A business sells €100 worth of goods to another fully taxable business and charges 23% VAT. Later, a discount of €20 VAT exclusive is granted and the seller reduces his/her VAT from €23 (€100 at 23%) to €18.40 (€80 at 23%). Subsection (4) prevents the seller reducing VAT on the sale to €18.40 unless he/she issues a VAT credit note requiring the customer to reduce his/her input credit on the purchase to €18.40. Otherwise, there would be a tax payment of €18.40 giving rise to a tax credit of €23.

Relevant Date: Finance Act 2020