Credit Note query for VAT rate change

PAMDILL · May 2009

I am not an MIP only a student but I have this problem at work just now, hoping one of you qualified members can help.

I have a VAT invoice issued to a customer under the 17.5% rate which is now to be credited in full and their account should now be £0.

Now as the VAT rate is currently 15% and the balance outstanding is £2,350 inc. VAT do I do a credit note for £2,000 & 15% VAT and a bad debt write off for the balance or do a credit note for £2350 inc. VAT, net £2043.48 which will then leave me with a slightly incorrect sales figure?

Bluewednesday · May 2009

For a credit note you put the VAT on at the rate that it was charged originally. Therefore your credit note will have VAT on at 17.5% which will clear their account and put things back as they were.

PAMDILL · May 2009

Bluewednesday wrote: »

For a credit note you put the VAT on at the rate that it was charged originally. Therefore your credit note will have VAT on at 17.5% which will clear their account and put things back as they were.

That is what I thought but when reading the HMRC website notice for credit notes issued when VAT Rates change it looked like I could only do that if the credit note was issued within 14 days of rate change.

sarahwilson · May 2009

Blue Wednesdays right, I tried to work it out off HMRC and it was utterly bamboozling!!

Gianni · May 2009

It does state on the HMRC web site all credit notes at the old rate should be issued by January 14th 2009. But in all honesty this was hardly practical and I believe HMRC did state they'd be relaxed in their attitude towards this.

I'd issue the credit note at 17.5% to cancel the original invoice (as I have done a few times after the rate change deadline date). If you were inspected and pulled up on this, yes it's a slight deviation but you can clearly explain why and therefore it won't be an issue.

Monsoon · May 2009

I agree with the posts saying credit it at 17.5% as that was the rate in force at the time of the invoice to which the credit note relates.

Toffeemadblue · May 2009

Absolutely we have done loads of credit notes at the old rate

A-Vic · May 2009

Ive also come accross this a lot but have also used the 17.5 %

PAMDILL · May 2009

Thanks, I have done that, I was just worried as being a construction company VAT Inspectors seem to be really really strict when they visit.

A-Vic · May 2009

Credit Notes arnt a problem for me its the actul invoices themselves using 17.5% and not small compaines either but some as late as january charging 17.5% one or two have issued correct invoices with the new vat charge but a large majority havnt.

Credit Note query for VAT rate change

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