A credit note – sometimes called a credit memo – is used to correct or cancel an invoice that has already been issued. It is most commonly raised when goods are returned, a complaint is upheld, a discount is applied after invoicing or a supply is partially or fully cancelled. A credit note is a legal document that adjusts the net amount and the VAT on the original invoice. On MyInvoiceOnline.co.uk you can generate a credit note in one click directly from the original invoice.
What must a credit note include?
The requirements for credit notes are set out in UK VAT legislation and HMRC guidance. In addition to the standard details of both parties, a credit note must contain a clear reference to the original invoice and a description of what is being corrected.
#When reducing the original amount (a credit note), use negative figures for both the net amount and the VAT. The customer must reduce their input VAT claim based on the credit note – and you reduce your output VAT liability. Both parties must reflect the adjustment in the VAT return for the period in which the credit note was issued.
When and why is a credit note used?
You issue a credit note whenever you need to retrospectively adjust the amounts on an invoice you have already issued – specifically the net amount or the VAT:
Goods returned – The customer has returned goods and you are issuing a refund. The credit note documents the reduction in the net amount and VAT.
Complaint upheld – You have provided a price reduction or replacement following a complaint about goods or services. The credit note corrects the original amount.
Retrospective discount – You have granted a volume discount, loyalty bonus or other discount after the original invoice was issued.
Cancellation of supply – The order was not fulfilled, or was only partially fulfilled. The credit note cancels the entire invoice or part of it.
Correcting an error – The original invoice contained an incorrect price, a miscalculated VAT amount or another numerical error.
A credit note is always issued by the supplier – the party who raised the original invoice. The customer cannot issue one. If you are the customer and need a correction, ask your supplier to issue a credit note.
Where do you find credit notes on MyInvoiceOnline.co.uk?
On MyInvoiceOnline.co.uk you can generate a credit note directly from an existing invoice – in one click:
Open the invoice you need to correct.
Select the option to create a Credit Note.
The system automatically copies the details from the original invoice – supplier, customer, line items, VAT.
Adjust the items to reflect the actual change (price reduction, returned goods) and save the document.
💡 For a step-by-step guide, see our article Issuing a credit note from an invoice.
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