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Applying a Payment to a Credit Note

Problem reported by Stephen Youngs FCCA 4 years ago

The original thread from a year ago has been answered (you can't!) but I think this should be bumped up to be a problem, see https://secure.clearbooks.co.uk/community/questions/7867/created. Seems more important than a development suggestion to me, as whilst the ClearBooks process physically recovers any VAT overpaid when it creates a refund transaction it doesn't produce the documentation required to back it up.

Gov.uk says (there will be a VAT notice behind this somewhere, just don't have time to look it up!):


Returned goods

When you return goods to a supplier or a customer returns goods to you, the balance of payment can be settled by issuing either a:

  • replacement invoice
  • credit or debit note
  • If you exchange the goods for goods of the same value you don’t need to issue a new VAT invoice.

Credit and debit notes

These must show the same information as the VAT invoice and:

  • why it was issued
  • the total amount credited, excluding VAT
  • the number and date of the original VAT invoice

My comment on the original thread is:

How can just processing a refund, without it being applied to a valid VAT invoice or credit note be correct? There is no 'source document' if you just pay a refund, what do you have to back-up the recovery of the VAT on the money repaid to the customer? Your original VAT invoice has not been amended, so you must have a VAT credit note to reduce the amount owed to you by the customer. If the customer has nothing to offset that against, then you have to be able to pay the credit note.

I think Kevin's suggestion is actually the ONLY workaround to this that can safely be used, the ClearBooks process is flawed.

I would be happy to be proved wrong however, please!

2 Replies

Hi Stephen - this fix has been requested several times now and it is "on the list" but people can work around it at the mo and so other, more important, issues have been taking priority. I've given it my vote though.

CB does actually handle VAT OK in that it creates it's own internal credit note and pays it off and so this replaces the actual credit note you have given the customer (or the supplier has given you). So you can still prepare your "proper" credit note and send it to them (as the VAT evidence per notice 700/21) but, if this results in a refund then it has to be deleted from the system and the payment treated as a refund, with Kevin's workaround being the best.

For your own records you can always attach the PDF of the original credit note to the invoice to which it relates.

It's a poor system Paul, and I suspect most ClearBooks users would not bother to raise a credit note to send to their customers once they realise it is impossible to refund them. That could lead to compliance problems for them and their customers. At the very least ClearBooks needs to publish user guidance, and publicise it. A closed thread on the Community is not enough.

In the case I am working on the credit note has already been on a VAT return so can no longer be voided, so for that there is an extra step of raising a dummy invoice to clear it down.

It is also not very good that ClearBooks doesn't force a credit note to refer to the original invoice and its date, as HMRC require. How many users remember to manually type that in the summary or line detail, or even know that they need to?

I'm not sure I always agree with ClearBooks prioritisation of issues, based purely on observation quality isn't always given the weighting it deserves. Where limitations in ClearBooks may lead to compliance problems for customers I think it deserves a high priority, certainly higher than new product or feature development.

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