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HMRC internal manual

VAT Traders’ Records Manual

Credit and Debit notes: Liability incorrect and change in rate of VAT in force

Regulation 15 of the VAT Regulations 1995 deals with cases of change of rate, or change in the description of an exempt, zero-rated, or reduced-rated supply. The Regulation determines that in this situation a credit note headed ‘Credit note - change of VAT rate’ and containing certain particulars must be issued within 14 days of the change.

Regulation 15 applies where there has been an election under section 88 of the VATA 1994. Section 88 concerns supplies spanning a change in the rate of VAT in force or in the description of exempt, zero-rated, or reduced-rated supplies or acquisitions, and allows businesses to elect to treat the time of supply with reference to the time of delivery of goods or performance of services. As invoices may already have been issued showing VAT at a higher or lower rate than that applicable following the election, Regulation 15 merely makes provision for the replacement or correction of them.

There is no provision for such credit notes to trigger an adjustment to the VAT account of either the supplier or the customer under Regulation 38. In such cases, you should follow the guidance at VATREC13100.