A credit note is appropriate where:

(1)there is a decrease in the amount of money due for a supply, e.g. the invoiced amount is too much because of a pricing error or a computer error; and

(2)goods are returned by the customer, e.g. because they are faulty or damaged.

Thus, if a supplier gives a customer a credit relating to a taxable supply for which a VAT invoice was issued, he may issue a credit note.

HMRC can make regulations regarding credit notes (VATA 1994, Sch. 11, para. 2(10)).

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