Credit note

A document reducing or cancelling an invoice. Not a refund.

What it means

A credit note reduces the amount owed on a previously issued invoice — for a return, a discount, an error or a goodwill adjustment.

Why it matters

It is how the accounts and the VAT return are corrected. Simply deleting an invoice breaks the audit trail and is not permitted once it has been issued.

What it looks like in practice

Reference the original invoice number. For VAT, the credit note adjusts the VAT in the period it is issued.

What to watch out for

Credit notes issued and never applied to the invoice, leaving both sitting on the aged debtors report and making it useless.

Where to get proper advice

Your accountant.