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What is the VAT treatment of cashbacks?

According to HMRC, ‘cashbacks’ are payments made by the manufacturer either directly or via a recovery agency, to a customer of a wholesaler or retailer. These can also be referred to as discount schemes, volume bonuses, etc. Payments are often made to trade customers as a reward for the volume of purchases made and payments to customers are normally made in respect of specific product promotions. These payments are made outside of the normal supply chain so the business cannot issue credit notes to reflect the reduction in the value of the original supply, so special VAT rules apply to these types of arrangements. The current VAT treatment is as a result of