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HMRC internal manual

VAT Traders’ Records Manual

Credit and Debit notes: Legal basis for credit notes

The only mention of credit notes in UK law is in Regulations 15 and 24 of VAT Regulations 1995 (SI 1995/2518). Regulation 24 defines the term “increase [or decrease] in consideration”.

This is because the VAT liability is determined by the underlying supply position, not by the issue or receipt of a credit note. So when questions arise about the validity or effect of a credit note, you need to determine why it was issued and look to the law that covers the underlying position. This might be, for example the law on:

  • consideration;
  • tax value;
  • correction of errors; or
  • overpayments of VAT.