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HMRC internal manual

VAT Valuation Manual

Monetary consideration: reductions in consideration

On occasions there will be payments between parties who are not next to each other in the transaction chain. This was the situation in Elida Gibbs (seeVATVAL06160). Only the parties involved should make adjustments to the consideration. The party making the payment should not issue a credit note. The party receiving the payment, if it is a business should adjust the input tax they have recovered. Intermediaries in the transaction chain should make no corrections or adjustments.

Manufacturers’ ‘cash back’ payments are explained in Notice 700/7 Business Promotion Schemes section 9.