VATREC13040 - Credit and Debit notes: What are the conditions of a valid credit note?

Regulation 15C of the VAT Regulations 1995 (SI 1995/2518) sets out the requirements for a credit note to be considered valid for VAT purposes. Case law has shaped these criteria; VATREC13120 gives details of some of the key cases.

For a credit note to be valid it must:

• be issued to the customer;
• correct a genuine mistake or overcharge;
• reflect an agreed reduction in the value of a supply;
• give value to the customer;
• not be issued for a bad debt; and
• be issued in good faith.

HMRC also require for credit notes to:

• be issued within 14 days of the decrease in consideration; and
• contain all the details specified in Notice 700, Paragraph 18.2.2.