Reversing entries – Credit Note
Learn about credit notes and invoice reversals for MTD compliance. Understand when and how to issue credit notes to reduce or cancel previously issued invoices.
Contents
Credit Notes & Invoice Reversals for MTD
What is a Credit Note?
A credit note is a document issued to reduce or cancel all/part of a previously issued invoice. It effectively "reverses" the original transaction for accounting and tax purposes.
When to Issue a Credit Note
- Overcharging – incorrect amount on original invoice
- Returned goods/services – tenant overpayment refunded, service not provided
- Discounts applied after invoicing – retrospective rent reduction
- Invoice errors – wrong VAT rate, description, or recipient
- Cancelled agreements – tenancy ended early, contract voided
Required Information
A valid credit note should include:
- Unique credit note number
- Invoice Date
- Reference to the original invoice (number & date)
- Reason/Note for the credit
- Amount being credited (including VAT breakdown if VAT-registered)
- Client/tenant details