What is a VAT credit note?
A Value-Added Tax (VAT) credit note is a document issued by a supplier to a customer. A credit note reflects a reduction in, or discount applied to, the price originally invoiced in respect of the goods or services supplied.
Why are VAT credit notes important?
The information given on a credit note is the basis for establishing your adjusted VAT figure on the supply of taxable goods or services.
It also enables your VAT registered customer to adjust the figures for the total VAT charged to them on their purchases.
If you issue a credit note showing a lesser amount of VAT than is correct, you are liable for the deficiency.
Next: When must a VAT credit note be issued?