VATREC13020 - Credit and Debit notes: Legal basis for credit notes

Credit and Debit notes: Legal basis for credit notes

The UK Law that covers credit notes is found in Regulations 15, 24 and 38 of VAT Regulations 1995 (SI 1995/2518). Regulation 24A defines the term “increase [or decrease] in consideration”.

This is because the VAT liability is determined by the underlying supply position, not by the issue or receipt of a credit note. So when questions arise about the validity or effect of a credit note, you need to determine why it was issued and look to the law that covers the underlying position. This might be, for example the law on:

• consideration;
• tax value;
• correction of errors; or
• overpayments of VAT.