In this article
Issue a credit note when the consideration for a supply you've already invoiced goes down. If it goes up, you issue a debit note instead. Either way you've got 14 days from the change, and the note has to carry a specific set of particulars set out in regulation 15C of the VAT Regulations 1995.
Most people trip on the timing of the VAT adjustment, because it doesn't belong in the period of the original invoice.
The short version
- A credit note reduces the consideration on an invoice you've already issued. A debit note increases it.
- Both must be provided within 14 days of the change.
- The note needs its own number and date, both parties' details, the original invoice's details, a description, the amount of the change excluding VAT, and the VAT credited in sterling.
- The adjustment goes in the VAT period in which the change occurs, not the period of the original invoice.
- A change in the VAT rate is a different rule, with 45 days instead of 14.
The short answer
A credit note is the document that corrects the value of a supply downwards after you've invoiced it. You don't edit the original invoice and you don't delete it. You issue a second document that refers to the first, and you adjust your VAT account in the period the change happened.
When you need a credit note
The trigger is a decrease in the consideration for a supply you've already invoiced. In practice:
- You overcharged, or invoiced the wrong quantity
- Goods came back, or part of the work was not delivered
- You agreed a discount or a settlement after invoicing
- You invoiced the wrong customer entirely and need to reverse it
And the mirror image: if the consideration goes up after you invoiced, the document is a debit note, not a second invoice. Regulation 15C sets both out together and applies the same 14 day limit to each.
One exclusion is worth knowing about. Regulation 15C "does not apply in relation to a case where the original supply was a supply of goods to a person who was not a taxable person". The document trail matters most where your customer is reclaiming the VAT.
What it must show
Regulation 15C(6) lists the particulars for a credit note:
| Particular | Note |
|---|---|
| The identifying number of the document | Its own number, in its own series or yours |
| The date of issue | Not the date of the original invoice |
| The name, address and registration number of the supplier | |
| The name and address of the recipient of the supply | |
| Details of the original VAT invoice | So the two documents can be tied together |
| A description of the goods or services supplied | |
| The amount of the decrease in consideration, excluding VAT | Net, not gross |
| The rate and the amount of the VAT credited, in sterling | Sterling, as on the invoice |
A debit note carries the same particulars, with the amount of VAT chargeable on the increase in place of the VAT credited.
The 14 day rule
Fourteen days from the change, for both credit notes and debit notes.
The clock runs from the change in consideration, not from your month end and not from the day somebody notices. If you agree a credit on the 20th it's due by the 3rd of the following month, so for most businesses it can't wait for the next billing run.
Which VAT period the adjustment belongs in
This is where credit notes go wrong most often, so read it slowly.
Regulation 38 requires that every entry "must be made in that part of the VAT account which relates to the prescribed accounting period in which the increase in consideration or decrease in consideration occurs".
So the adjustment belongs in the period of the change, not the period of the original invoice. If you invoiced in March and credit it in May, the credit goes in your May return and you don't reopen March.
Both sides move. You make a negative entry in the VAT payable portion for a decrease and a positive one for an increase, and your customer does the mirror in the VAT allowable portion. For an increase there's a condition on them too: they cannot make the entry "unless the recipient of the supply holds the debit note which the supplier is required to provide". So your customer's VAT position depends on you sending the document.
The rate change exception
If the reason for your credit note is a change in the VAT rate, a different regulation applies and you get longer: the supplier must provide the credit note "within 45 days after any such change or within such longer period as the Commissioners may allow".
Forty five days for a rate change, 14 days for a change in consideration. They're easy to collapse into a single rule, so keep them apart in whatever process you write down.
Shortcuts to avoid
Four shortcuts come up again and again when a customer queries an invoice, and each one causes you a problem further down the line.
Editing the original invoice doesn't help once it has gone out, because your customer already has a document with a number on it and changing your copy leaves the two of you holding different versions of the same invoice.
Deleting the invoice and reissuing breaks your numbering, and the number of the deleted invoice is then gone from the sequence with nothing to explain it.
Netting the adjustment off the next invoice is convenient, but it hides the change from both VAT accounts, and if your customer is reclaiming VAT they need the credit note itself.
Waiting for the month end catches people out, because fourteen days doesn't bend for your billing cycle.
Common questions
When should I issue a credit note? When the consideration for a supply you've already invoiced decreases. You have 14 days from the change to provide it.
What is the difference between a credit note and a debit note? A credit note is issued when the consideration decreases. A debit note is issued when it increases. Both carry the same particulars and the same 14 day limit.
Which VAT period does a credit note go in? The period in which the decrease in consideration occurs, not the period of the original invoice. Regulation 38 is explicit about this.
Does a credit note need its own number? Yes. It needs its own identifying number and its own date of issue, plus the details of the original VAT invoice so you can match the two.
Can I just cancel the original invoice instead? No. Your customer already holds it. Issue a credit note that refers to it and keep both documents.
Is the deadline ever longer than 14 days? Yes, where the credit note is issued because the VAT rate changed. That falls under regulation 15 and the limit is 45 days.
Sources
- legislation.gov.uk — VAT Regulations 1995, regulation 15 (accurate as of August 2026)
- legislation.gov.uk — VAT Regulations 1995, regulation 15C (accurate as of August 2026)
- legislation.gov.uk — VAT Regulations 1995, regulation 38 (accurate as of August 2026)
Reviewed by the Adfin team. This article explains how invoicing works and is not tax or legal advice. Requirements are correct as of August 2026; check current HMRC guidance before relying on them. Last updated August 2026.
