It sounds more like the salesman was bending the truth a little bit, far from illegal but there is indeed a statement sent to All Motability Dealerships stating it is not allowed and against policy.
the key thing is it’s all in the wording. No Dealership gives you a discount on the AP (the AP is set by Motability, and Motability receive the full amount no matter what) some dealerships offer “Cash Back” .etc
As a friendly salesman who is a great source of information to me said , Motability dictate and insist on no discounts and it could jeopardise motability/dealership relationship, But he also pointed out they could argue thier are lots of incentives to customers and to withhold from individuals because they are Business or Motability could be discriminatory.
officially it’s not allowed but there are ways around it.