Mistakes on invoices happen: a wrong price, the wrong VAT rate, a missing VAT number or the wrong customer name. With a VAT invoice you can't just edit the original and send it again, because your customer may already have used it to reclaim VAT. You need to correct it in a way that leaves a clear record for both of you and for HMRC.
In short: to reduce or cancel an invoice, issue a credit note. To increase it, issue a supplementary invoice (sometimes called a debit note). For a full correction, cancel the original with a credit note and issue a new invoice with a new number. Never delete or re-use the original invoice number.
Which fix do you need?
| The mistake | How to fix it |
|---|---|
| You charged too much (price or VAT) | Credit note for the difference |
| You charged too little | Supplementary invoice for the difference |
| Wrong VAT rate | Credit note to cancel, then a new invoice at the right rate |
| Wrong customer name or address | Credit note to cancel, then a new invoice with the right details |
| Missing your VAT number or other required detail | Credit note to cancel, then a new, complete VAT invoice |
| Goods returned or job cancelled | Credit note for the returned or cancelled amount |
| Discount agreed after invoicing | Credit note for the discount and the VAT on it |
If you spot the error before sending the invoice, just fix it. These rules apply once the invoice has gone to the customer.
What a VAT credit note must show
A credit note that adjusts VAT needs to show much of the same information as a VAT invoice:
- A unique credit note number and the date of issue
- Your name, address and VAT registration number
- Your customer's name and address
- The number and date of the original invoice it relates to
- The reason for the credit, such as "goods returned" or "incorrect VAT rate"
- A description of what's being credited, with quantities and amounts
- The VAT rate and the amount of VAT credited at each rate
- The total credited excluding VAT, and the total VAT credited
Label it clearly as a credit note. Many businesses give credit notes their own number sequence, such as CN-001, CN-002.
Worked example: wrong VAT rate
You invoiced children's car seats at 20% instead of 5%:
| Document | Net | VAT | Total |
|---|---|---|---|
| Original invoice INV-104 (20%, wrong) | £400.00 | £80.00 | £480.00 |
| Credit note CN-012 cancelling INV-104 | −£400.00 | −£80.00 | −£480.00 |
| New invoice INV-117 (5%, correct) | £400.00 | £20.00 | £420.00 |
If the customer has already paid £480, you refund £60 or hold it as credit. Your output VAT for this sale ends up at £20, the correct figure. The VAT Invoice Calculator helps you check the new figures before you send them.
How corrections affect your VAT return
- Record the credit note in the period you issue it. Don't go back and change the original VAT return. The credit note reduces your output VAT in the current period, and your customer reduces their input VAT.
- Supplementary invoices go in the period you issue them, and increase your output VAT.
- If an error has already gone on a VAT return, you can usually correct it on your next return if the net value of all errors is below the error correction threshold: £10,000, or up to 1% of your Box 6 turnover (capped at £50,000). Bigger errors, or deliberate ones, must be reported to HMRC separately, usually on form VAT652.
- You can generally correct errors going back up to 4 years.
For the full picture of what goes where, see how to prepare for a VAT return.
If you charged too much VAT
If you charged VAT when you shouldn't have, or at too high a rate, the VAT you charged still has to be paid to HMRC unless you correct it. To reclaim it from HMRC, you normally need to refund the customer (with a credit note) first. HMRC won't usually repay over-charged VAT to a business that keeps it rather than passing it back.
If you charged too little VAT
You owe HMRC the correct amount of VAT whether or not you collected it from the customer. You can issue a supplementary invoice for the extra VAT, but whether the customer has to pay it depends on your contract and prices. If they won't, the VAT comes out of your margin.
If you received a wrong VAT invoice
As a customer, ask the supplier for a corrected VAT invoice or credit note. Only reclaim the VAT that is correctly charged and shown. If the supplier's VAT number looks wrong, check it with HMRC before reclaiming anything.
Mistakes to avoid
- Editing and re-sending the original invoice with the same number
- Deleting an invoice from your records
- Issuing a credit note with no link to the original invoice
- Issuing a credit note just to move VAT between periods when nothing actually changed
- Forgetting to record the credit note in your accounting software
Frequently asked questions
Can I just cancel a VAT invoice?
Not by deleting it. Cancel it with a credit note for the full amount, and keep both documents.
Can I re-use the invoice number?
No. Invoice numbers must follow an unbroken sequence and each must be unique. Give the corrected invoice the next number in your sequence.
Is a credit note the same as a refund?
No. A credit note reduces what the customer owes. You might then refund the money or leave it as credit against future invoices.
Related: what a VAT invoice must include and VAT invoice vs normal invoice.
Official sources: HMRC VAT guide (Notice 700) and HMRC: How to correct VAT errors (Notice 700/45).