Pegasus – Prompt Payment Discount

Prompt Payment DiscountPrompt Payment Discount with Opera II & Opera 3

New releases of Opera 3 (version 2.22.00 and above) and Opera II (version 7.42.00 and above) will allow invoices to be calculated in line with the Prompt Payment Discount (PPD) legislation. The following Financial applications and stationery are affected:

EC VAT application

Users who have the EC VAT application can deselect the ‘VAT After Discount (Settlement)’ checkbox of the Home Country record on the Countries form. This will allow the VAT to be calculated before the settlement discount percentage figure is considered. The Opera 3/Opera II Importer has been changed to respect this setting.

Users who do not have the EC VAT application will see a new date control on the Options tab of the Company Profiles form. This will allow the user to state the date from when VAT should be calculated before settlement discount. By default the date will be set to 1 April 2015.

From an Invoice generation perspective the software will work the same irrespective of whether EC VAT is in use or not.

New stationery – Pegasus Business Forms

A new SOP Invoice (PEG630 stationery design) and Sales Statement designs (PEG610 stationery design) will be available to assist with the new requirements.

Sales Ledger

If Prompt Payment Discounts are to be offered by a business to its customers, the invoices generated should be done so using the new PPD invoice design (PEG630). This design will highlight to the recipient of the invoice the amount of VAT that is required to be adjusted if full payment of the invoice is made by the stated dates.

If a customer takes up the offer of Prompt Payment Discount, the VAT liability will need to be reduced. This can be achieved by raising a Credit Note. Raising the transaction through the Sales Order Processing or Invoicing application will mean that documentary evidence of the PPD Credit is automatically achieved. It is the responsibility of the business user to provide HMRC with documentary evidence of a PPD Adjustment if required to do so in a VAT audit.

The user will need to consider how they want to treat the Sales Analysis of the Credit Note posting, either posting to a Discounts Allowed P&L Account or the Sales P&L Account used on the original invoice line.

When the Receipt is banked, the Invoice and Credit Note can be allocated against the Receipt to close down the transaction. When sending Sales Statements to their customers, the business should use the new Sales Statement design (PEG610) that will display details of the second reference of the Credit Note, so this could be used to identify which Invoice the PPD Credit relates to.

Purchase Ledger

HMRC have not mandated the need to issue a Credit Note to deal with the PPD adjustment although in Opera 3 and Opera II this must take place to deal with the required update of the VAT Return. It will be necessary for the purchase ledger clerk to have an understanding of whether the supplier is expected to confirm the VAT Adjustment required via a Credit Note. This may cause operative issues as the user may wish to pay the invoice to take advantage of the PPD offered but is not aware of the VAT adjustment required. They will have to gain confirmation of the adjustment required and it’s Supplier Reference before raising the Purchase Credit Note in order to allocate and close down the transaction.

The calculation is the same as detailed in the Sales Ledger.

For further details on Prompt Payment Discount please contact us.

Operations II

A New release of Operations II (version 3.17 and above) will allow invoices to be calculated in line with the Prompt Payment Discount legislation. The following Financial applications and stationery are affected:

What changes should be made to Operations II (3.17) on 1 April 2015?

If the Operations II software is not linked to Opera 3 or Opera II the ‘VAT After Discount (Settlement)’ checkbox on the Home Country record of the Countries form in EC VAT should be unticked.

If the Operations II software is linked to Opera 3 or Opera II and the EC VAT application is not in the activation for the Opera software the ‘VAT After Discount (Settlement)’ checkbox on the Home Country record of the Countries form in EC VAT should be unticked.

If the Operations II software is linked to Opera 3 or Opera II and the EC VAT application is activated in the Opera software the ‘VAT After Discount (Settlement)’ checkbox on the Home Country record of the EC VAT Countries form in Opera should be unticked.

General PPD information in this release

Any un-invoiced orders or deliveries created before 1 April 2015 and invoiced on or after 1 April 2015 will be done so under the new rules therefore it is advised that if possible users should invoice any outstanding orders/deliveries before the change of rules. It is advisable to post any relevant credit notes before the change of rules as credit notes raised in April that relate to invoices raised in March will be updated using the new rules.

Please be aware that if a sales order which was raised to a customer who is offered PPD in March, then invoiced in April the VAT on the lines will be recalculated, therefore the invoice will be raised at a different total value to the original sales order.

You will need to consider whether any document designs require amendment to conform to these legislative changes.

Please note that Update Data Structures must be run on this release as a new option called ‘VAT Settlement Discount From’ has been added to the System Settings – Company Details section in System Configuration.

Please also note if your Operations II system is linked to Opera 3 or Opera II, you will need to upgrade to the PPD compliant releases (Opera 3 v2.22.00 and Opera II v7.42.00).

For details on this legal change, see the official website of the HMRC.

For further details on Prompt Payment Discount please contact us.