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Credit notes are issued by a supplier when the price for a supply is reduced after a tax invoice was issued, for example when faulty goods are returned. The credit note is accounted for in the period the credit note was received .
A credit note must show:
It must also have either:
A credit note can be combined and issued with a tax invoice, provided it contains the required information (listed above) and must relate to a different supply that a tax invoice has been issued for previously. A combined invoice and credit note cannot be issued for the same supply.
Shelley sells cleaning goods to Lesley for $1,000. Lesley pays Shelley $900 as some goods are damaged. Shelley issues a credit note for $100. Both Lesley and Shelley use the invoice basis.
Shelley's return
$1,000 is included in Box 5 (sales). $100 is claimed in Box 11 (purchases) in the return covering the time when the reduction was made.
If the invoice and credit note were issued in the same period, Shelley could have shown the net amount of $900 in Box 5 instead.
Lesley's return
$1,000 is claimed in Box 11 (purchases). $100 is included in the total sales in Box 5, in the return covering the time when the reduction was made. If Lesley received the invoice and credit note in the same period, she could claim the net $900 in Box 11.