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HMRC internal manual

VAT Time of supply

Actual tax points: VAT invoices: credit notes

The time of supply rules do not apply to the issue of credit notes. Also the issue of a credit note has no direct effect on a tax point once it has been established. What a credit note normally does is to permit the issuer to adjust the VAT previously accounted in accordance with an earlier tax point. This may be illustrated, for example, in the case of a supply where a tax point has previously been created by the issue of a VAT invoice. Due to a change in circumstances the earlier invoice is later cancelled by the issue of a credit note and replaced by an amended invoice for a reduced amount. This does not cancel the tax point created by the earlier invoice. The issue of the credit note is merely the means by which an adjustment may be made to the amount of VAT previously accounted for in response to the tax point.

The only exception to this is where the adjustment becomes appropriate because no supply actually takes place. Although any earlier tax point will be cancelled, this will be due to the absence of a supply rather than the issue of the credit note.