Discounts and charges in Peppol: UNCL5189 and 7161 codes

In a Peppol invoice, a discount is an allowance (cbc:ChargeIndicator = false) and a surcharge such as freight is a charge (true). Allowance reason codes must come from a short Peppol subset of UNCL5189, with 95 (Discount) as the general-purpose code. Charge reason codes come from the full UNCL7161 list, such as FC (Freight service) or DL (Delivery). Either way, you may send reason text instead of a code.

Three levels of discount and charge

Level	UBL location	Allowance	Charge	Affects
Document	/Invoice/cac:AllowanceCharge	BG-20	BG-21	BT-107 / BT-108, VAT breakdown
Line	cac:InvoiceLine/cac:AllowanceCharge	BG-27	BG-28	Line net amount BT-131
Price	cac:Price/cac:AllowanceCharge	BT-147 (price discount)	Not allowed	Net unit price BT-146

Allowance codes: the Peppol subset of UNCL5189

PEPPOL-EN16931-CL002: "Reason code MUST be according to subset of UNCL 5189 D.16B." BR-CL-19 enforces the same list. The 19 allowed codes, with names from the Peppol code list:

Code	Name	Code	Name
41	Bonus for works ahead of schedule	71	Point of sales threshold allowance
42	Other bonus	88	Material surcharge/deduction
60	Manufacturer's consumer discount	95	Discount
62	Due to military status	100	Special rebate
63	Due to work accident	102	Fixed long term
64	Special agreement	103	Temporary
65	Production error discount	104	Standard
66	New outlet discount	105	Yearly turnover
67	Sample discount
68	End-of-range discount
70	Incoterm discount

There is no ZZZ for allowances. Our test with ZZZ on a discount failed both BR-CL-19 and CL002. If nothing fits, send text only.

Charge codes: UNCL7161

PEPPOL-EN16931-CL003: "Reason code MUST be according to UNCL 7161 D.16B." The list is long. Codes UK businesses commonly need:

Code	Name
FC	Freight service
DL	Delivery
SAA	Shipping and handling
PC	Packing
ABL	Additional packaging
SH	Special handling
AEO	Collection and recycling
FI	Financing
IS	Invoicing
ADR	Other services
ABK	Miscellaneous
ZZZ	Mutually defined

Using an allowance code such as 95 on a charge failed BR-CL-20 and CL003 in our tests.

Rules every allowance and charge must pass

• Reason: BR-33 (allowance) and BR-38 (charge) require a reason text or a reason code. Our test with neither failed BR-33 and BR-CO-21.
• VAT category: BR-32: "Each Document level allowance (BG-20) shall have a Document level allowance VAT category code (BT-95)." BR-37 is the same for charges. Without one, our test also failed BR-S-08, because the VAT breakdown no longer added up.
• Percentages: R041 and R042 say base amount and percentage must come together. R040: "Allowance/charge amount must equal base amount * percentage/100 if base amount and percentage exists", with a tolerance of 0.02.
• Totals: document-level allowances and charges feed BT-107 and BT-108 (AllowanceTotalAmount, ChargeTotalAmount) and the VAT breakdown for their category and rate.

The rules that never fire

BR-CO-05 to BR-CO-08 say the reason code and reason text "shall indicate the same type". They are published as fatal, but in the 3.0.21 artefacts their test is true(), so they always pass. We sent code 95 (Discount) with the text "Freight charge" and the invoice passed. Your receiver's AP system may still be confused, so keep code and text consistent.

A valid example

A 10% discount on £500 of goods plus £25 freight, both standard rated:

<cac:AllowanceCharge>
  <cbc:ChargeIndicator>false</cbc:ChargeIndicator>
  <cbc:AllowanceChargeReasonCode>95</cbc:AllowanceChargeReasonCode>
  <cbc:AllowanceChargeReason>Discount</cbc:AllowanceChargeReason>
  <cbc:MultiplierFactorNumeric>10</cbc:MultiplierFactorNumeric>
  <cbc:Amount currencyID="GBP">50.00</cbc:Amount>
  <cbc:BaseAmount currencyID="GBP">500.00</cbc:BaseAmount>
  <cac:TaxCategory>
    <cbc:ID>S</cbc:ID>
    <cbc:Percent>20</cbc:Percent>
    <cac:TaxScheme><cbc:ID>VAT</cbc:ID></cac:TaxScheme>
  </cac:TaxCategory>
</cac:AllowanceCharge>
<cac:AllowanceCharge>
  <cbc:ChargeIndicator>true</cbc:ChargeIndicator>
  <cbc:AllowanceChargeReasonCode>FC</cbc:AllowanceChargeReasonCode>
  <cbc:AllowanceChargeReason>Freight</cbc:AllowanceChargeReason>
  <cbc:Amount currencyID="GBP">25.00</cbc:Amount>
  <cac:TaxCategory>
    <cbc:ID>S</cbc:ID>
    <cbc:Percent>20</cbc:Percent>
    <cac:TaxScheme><cbc:ID>VAT</cbc:ID></cac:TaxScheme>
  </cac:TaxCategory>
</cac:AllowanceCharge>

With one £500 line, the totals are: LineExtensionAmount 500.00, AllowanceTotalAmount 50.00, ChargeTotalAmount 25.00, TaxExclusiveAmount 475.00, and a single 20% breakdown with TaxableAmount 475.00 and VAT 95.00. This passed the BIS 3.0.21 rules.

The document-level elements go after cac:PaymentTerms and before cac:TaxTotal. UBL element order is enforced by the schema.

Price-level discounts

A trade discount on the unit price is shown as gross price minus a price allowance:

<cac:Price>
  <cbc:PriceAmount currencyID="GBP">45.00</cbc:PriceAmount>
  <cac:AllowanceCharge>
    <cbc:ChargeIndicator>false</cbc:ChargeIndicator>
    <cbc:Amount currencyID="GBP">5.00</cbc:Amount>
    <cbc:BaseAmount currencyID="GBP">50.00</cbc:BaseAmount>
  </cac:AllowanceCharge>
</cac:Price>

Two Peppol rules apply. R044: "Charge on price level is NOT allowed. Only value 'false' allowed." R046: "Item net price MUST equal (Gross price - Allowance amount) when gross price is provided." Changing the allowance to 4.00 failed R046, and changing the indicator to true failed R044. BR-27 also says the net price "shall NOT be negative". For a line total that does not equal quantity × price, see PEPPOL-EN16931-R120.

UK VAT: which discounts reduce the taxable amount

Peppol only checks the arithmetic. HMRC decides the VAT value (VAT Notice 700, 7.3.2):

• Unconditional discounts: "the tax value is based on the discounted amount". Send as an allowance on the invoice.
• Prompt payment discounts: "the tax value is based on the actual amount paid". This is not an allowance on the invoice; it is usually stated in the payment terms or handled by credit note.
• Contingent discounts (for example, volume rebates earned later): VAT is on the full amount at first, and "you can adjust the amount of tax by issuing a credit note". See credit notes in Peppol.

If a document-level discount covers lines at different VAT rates, split it into one allowance per rate. One allowance can only carry one VAT category and rate. For delivery on mixed-rate invoices, HMRC's rules on whether delivery is a separate supply apply first.

What to do now

• Map each ERP discount and surcharge type to a code from the right list, or to text only.
• Give every document-level allowance and charge its own VAT category and rate.
• Never put a surcharge at price level.
• Test with the e-invoice validator.

Related: UK VAT category codes in Peppol, VAT rounding in Peppol.