Credit note.. to VAT or not

Emily

Hi Folks, I need to raise a credit note for an invoice that had VAT on it. My client overpaid by £360 on an invoice that had VAT on it. When raising the credit note, should I deduct the VAT amount so the credit note then adds it back on, or do I just raise a flat £360 amount with no VAT added, i.e. 0% it?

Thanks,

Emily

TomFromCrunch

Emily Hi Emily! Just to clarify - as the end client overpaid by £360, does that mean that the invoice is fully paid as normal, and you just have an amount of £360 more in your bank?

If so, I've spoken to an expert and they've advised that you can just refund the £360 without the need to credit note the invoice.

Hope this helps, if you still aren't sure let us know!

Emily

Hi Tom, Thanks for getting back to me and sorry for the delay in replying. Yes, fully paid invoice - basically we had to amend how the time was split on a couple of invoices and so we'd sent a version 2 but they paid the original which was a higher amount.

I asked the client how they'd like the refund and they asked me to create a credit note - originally, I showed it as negative line on our next invoice to deduct the whole amount by £360 but they didn't go for that option.

Do you mean refund by bank transferring it back to them? We don't have their details.

As they've asked for a credit note, I should honour that - but the VAT question still remains.

Thanks,

Emily

TomFromCrunch

Hi Emily - no worries! Firstly you'll need the end client's bank details to transfer the money back to them.

Once you've done that, you'll need to raise an invoice of £360 - this can be raised without VAT, and the £360 allocated to this invoice. The credit note will then be raised, and a refund created.

Emily

Thanks so much for your help, Tom! Sorted.

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