Annual volume rebates with a UK sourcing seller
Agree a written rebate schedule before ordering: eligible invoice lines, the annual period, quantity thresholds, calculation method, returns treatment and settlement dates. Reconcile the result to invoices and credit notes, rather than forecasts or order totals. Put these terms in your agreement with Cambridge China Bridge.
Agree who pays the rebate and what qualifies
Name the buying company and the UK selling company in the rebate schedule. State which buyer accounts, product lines and destinations qualify, and whether purchases across related companies can be combined. Confirm the provider's role using agent or seller. Keep your seller's rebate separate from any rebate its factory pays it.
List included and excluded invoice lines explicitly: goods, samples, tooling, freight, duty and services. For a bundled landed price, agree whether the whole price qualifies or whether the seller will identify an eligible goods value. Use a basis visible on the invoices or an agreed supporting breakdown.
Make the quantity thresholds calculable
Write the annual start and end dates, the counting unit and the event that makes a purchase eligible: invoicing, delivery, acceptance or payment. Decide how split deliveries and purchases around the year end are allocated. Define product groups and pack conversions so cartons, sets and individual items are not counted inconsistently.
State each threshold and its rebate rate or amount in the signed schedule. Specify whether reaching a band changes the rebate on all eligible purchases or only purchases above that threshold. If quantity determines the band but invoice value determines the payment, say so. Keep forecasts separate from qualifying purchases and any minimum purchase commitment; see negotiating factory terms.
Handle returns without counting adjustments twice
Agree how cancellations, rejected goods, returns and price credits affect both qualifying quantity and eligible value. Distinguish a return from a price reduction where the buyer keeps the goods. State whether free replacements count, and link replacements to the original purchase so the same goods do not earn a rebate again.
Set a process for returns credited after the annual cut-off. Choose whether to reopen the calculation or adjust a later settlement, including what happens if the return moves purchases below a threshold. Keep defect claims and rebate adjustments separately identifiable; use faulty goods and claims for the underlying goods dispute.
Set dates for calculation, review and payment
Put calendar dates in the schedule for the seller's statement, the buyer's review, resolution of differences, credit-note issue and settlement. Name the contact responsible on each side. Agree how undisputed amounts are settled while disputed lines are checked, and whether unresolved returns are held back or adjusted later.
Choose bank payment, an account credit or an agreed deduction from a future invoice. For an account credit, agree what happens if there is no further order or the trading relationship ends. Define any paid-invoice condition and its cut-off. Ask your accountant to confirm the VAT treatment and accounting period for the agreed settlement method.
Reconcile the rebate to actual invoices
Ask for a line-by-line statement showing invoice reference and date, product, qualifying quantity, eligible value excluding VAT, linked return or credit references, and the resulting rebate. Reconcile it to your purchase ledger and supporting delivery or payment records where those determine eligibility. Explain every exclusion and match the final credit or payment back to the agreed statement.
HMRC says a credit note would normally be issued when a retrospective discount target is achieved, either with or without VAT. Agree how the seller will identify the invoices covered by that credit note. Retain the schedule, reconciliation, approvals and settlement evidence together, and ask your accountant to check any VAT adjustment before posting it.
Frequently asked questions
Do annual rebates include freight and VAT?
Define the eligible base in the schedule. Identify whether freight and other bundled charges qualify, and show the rebate calculation excluding VAT separately from any VAT treatment.
Does the highest rebate band apply to all purchases?
Only use that calculation if the agreed schedule says so. Specify whether the achieved band applies to all eligible purchases or only the purchases above its threshold.
What happens if goods are returned after year end?
Agree whether to reopen the annual calculation or adjust a later settlement. Cover both the returned value and any effect on the quantity band, including when there is no further order.
How do I check the seller's annual rebate statement?
Match eligible invoice lines to your purchase ledger, deduct agreed returns and credits, check the achieved band, then reconcile the calculated rebate to the seller's credit note and settlement.