Credit note

Once an invoice has reached the client and your VAT records, it should not be edited or deleted. The correction is a separate document that points at it. HMRC's guidance says a valid credit note must be issued to the customer, correct a genuine mistake or overcharge or reflect an agreed reduction in the value of the supply, give value to the customer, be issued in good faith, and not be used for a bad debt, which has its own relief. HMRC expects it to be issued within 14 days of the reduction and to carry the details listed in VAT Notice 700.

On a contract desk the typical case is hours. A client invoice for five days at £660 plus VAT, £3,960 in total, turns out to include a day the contractor was off sick. The credit note is £660 plus £132 VAT, £792, numbered against the original. The finance team then has to answer a second question: what happens to the £550 already self-billed to the contractor's company for that day?

If the day was never worked, the self-bill was wrong too and needs its own correction. If the credit was commercial, a goodwill discount or a quality dispute about work that was done, clawing the money back from the contractor is a different matter. For a contractor who has not opted out of the Conduct Regulations, regulation 12 bars withholding pay for work done because the client has not paid, and most contractor terms do not allow it either. Where it is contested, take advice before deducting anything.

On perm desks, credit notes are how rebates are paid when a candidate leaves inside the rebate period. The failures there are commission paid on the original fee and never adjusted, and credit notes raised in the CRM that never reach the accounts system. A void is a different tool: it is for an invoice that should never have existed, such as a duplicate, and belongs before the client has paid or acted on it.

The longer answer: What is a rebate period in recruitment?