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HMRC internal manual

VAT Traders’ Records Manual

Credit and Debit notes: ‘Document having the same effect’ as a credit note

Regulation 24, VAT Regulations 1995 says

“In this Part-

“increase in consideration” means an increase in the consideration due on a supply made by a taxable person which is evidenced by a credit or debit note or any other document having the same effect and “decrease in consideration” is to be interpreted accordingly;”

This means that the evidence of a change in the supply position does not have to be in the usual form of a credit or debit note but can be in the form of ‘any other document having the same effect’, for example a letter. As normal commercial practice is to issue a credit note, such a document may not be recognised as giving rise to an adjustment of input tax on receipt by the customer. Also suppliers may omit to adjust their output tax for similar reasons.

In line with the British Telecom tribunal decision a credit note, debit note or document having the same effect, must be issued if the customer is VAT registered. However this may not be a requirement if the customer is not registered for VAT, see VATREC13120 under the heading General Motors Acceptance Corporation UK Ltd (GMAC) (LON/01/242) for more details.