What is a debit note? Debit notes explained for UK suppliers

The invoice has gone, and then the price moves. A line was left off, a price change landed after the order shipped, or the job took longer than quoted. HMRC's own example is the last one: businesses may raise a price "when more work is required to complete a task than was originally anticipated." Its next sentence gives the answer: "In these cases, businesses normally issue debit notes for the increased amount and account for the additional VAT."

What is a debit note?

A correcting document that adds to an invoice already issued. HMRC's VAT Trader Records manual sets the pair side by side: "Credit notes amend or correct previously issued invoices; the invoices are the documents that evidence taxable supplies." And: "Debit notes might be issued where there is an increase in consideration for a supply, rather than a supplementary invoice being raised."

So the invoice stays the record of the supply. The debit note records the change.

The legal hook is Regulation 38 of the VAT Regulations 1995. Where the value of a supply changes, HMRC says the parties must adjust their VAT, and "Such changes will be evidenced by a credit note or a debit note." This page follows HMRC's guidance as published, checked in October 2026.

A debit note at a glance

Who issues a debit note: the supplier or the customer?

Both, depending on who is using the word.

The supplier's debit note. HMRC's VAT guide sets the rules for the supplier's debit note for an increase: it must reflect "a genuine mistake or undercharge or an agreed increase in the value of the supply". This is the meaning the rest of this page follows.

The customer's debit note. Some customers send a document called a debit note to claim a reduction. HMRC's electronic invoicing notice, VAT Notice 700/63, sets what such a document must contain: "Credit notes, or documents such as debit notes that fulfil the same function as credit notes, must contain both:" "the same details as the original invoice to which they refer" and "sufficient information to identify the original invoice".

But HMRC's manual on the 2019 rules says that in most cases "the ability for customers to be able to issue a tax debit note instead of the supplier issuing a credit note has been removed". So for VAT, a customer's debit note is a claim. If the supplier agrees it, the supplier issues its own credit note.

Self-billing is the exception: the customer issues the correcting documents, because it wrote the invoice in the first place. The self-billing guide covers that case.

Trade into the Republic of Ireland adds a third view. In Ireland, Revenue's guidance says: "A debit note can be issued by a customer to their supplier and be treated as a credit note." It adds: "The supplier must accept the debit note in order for it to be valid." That is Irish guidance for Irish VAT, not a UK rule.

Read a debit note by what it does to the amount. The name alone will not tell you.

What must a UK debit note show?

HMRC's VAT guide, Notice 700, sets the conditions in paragraph 18.2.4: "To be valid for VAT purposes a debit note must:" "reflect a genuine mistake or undercharge or an agreed increase in the value of the supply, and be issued within 14 days of the increase being agreed between the supplier and the customer".

It must then show clearly:

1. The "identifying number and date of issue" of the debit note
2. The "name, address and registration number of the supplier"
3. The "name and address of the customer"
4. The "identifying number and date of issue of the VAT invoice or invoices relating to the supply for which there is an increase in price"
5. "a description sufficient to identify the goods or services supplied to which the increase in price applies"
6. "the amount of the increase in price, excluding VAT"
7. "the rate and the amount of VAT debited (expressed in sterling)"

Mixed notes carry one more condition: "Credits for zero-rated or exempt supplies included in a credit or debit note must be totalled separately and the note must show clearly that no VAT credit has been allowed for them."

HMRC's list ends at the invoice, and the invoice points back to the order. As the purchase order guide says of the PO number: "Every later document quotes it so the customer can find the order it belongs to."

When must a debit note be issued?

Within 14 days of the date the increase is agreed. HMRC's manual on the rules in force since 1 September 2019 says: "The supplier must issue a debit note to reflect the change in price and they have 14 days from the date the increase in price is agreed with the customer to issue it."

The clock starts at agreement. It does not start at the original invoice or the delivery.

Credit notes run on a different clock. "A credit note must be issued to the customer to reflect the decrease and the 14 day time limit for issuing this starts once the refund has been made to the customer." An offset against what the customer owes counts as the refund. Agreement for an increase, refund or offset for a decrease.

Miss the window and HMRC treats it as an error: "But if a business fails to issue a debit note or credit note within the time limit, or fails to make the required accounting entries in time, this is an error which must be corrected under the normal rules."

Debit note vs credit note vs invoice

HMRC's 2019 brief on price changes gives the mirror case: goods arrive faulty, the price is cut, and "When this occurs a business normally sends its customer a credit note and gives a refund."

A debit note is not an invoice in its own right. It adjusts one, and HMRC will not treat it as valid without the original invoice's number and date. For how credit notes work in EDI, see the EDI invoice guide.

How does VAT work on a debit note?

Use the original rate. Notice 700, paragraph 18.2.5: "The rate of VAT to be used for a credit or debit note is the one which was in force at the time of the tax point of the original supply."

The supplier accounts for the extra VAT in the VAT period in which the increase is agreed. Paragraph 18.2.6 sets the moment: "For increases in price this will be when the supplier and customer reach agreement over the increased value of the supply." A decrease runs the other way: "For decreases in price this will be the accounting period where the refunded amount is paid to the customer." An offset counts as the refund, and in most cases the VAT document for the decrease is the supplier's own credit note rather than the customer's debit note.

One exception: where the VAT was wrong on a return already submitted, 18.2.6 says "the remainder of this section does not apply", and the error is corrected under the error-correction rules in VAT Notice 700/45 instead.

Keep every correcting document. Notice 700/21 lists "credit or debit notes you issue or receive" among the records VAT law requires, alongside "orders and delivery notes".

How do debit notes travel by EDI and Peppol?

Inside the invoice message. GS1's EANCOM invoice message, INVOIC, is defined this way: "The United Nations Standard Invoice Message, with correct data qualification, serves also as the specification for Debit Note and Credit Note messages."

The document code tells the receiver what it has. The INVOIC code list includes "383 = Debit note - goods and services" and, for self-billing, "527 = Self billed debit note". The reference segment then ties the debit note to what it corrects, with qualifiers such as "DL = Debit note number" and "IV = Invoice number".

Peppol works the same way. OpenPeppol's BIS Billing 3.0 code list for the invoice type code includes 383, "Debit note": "Document/message for providing debit information to the relevant party." So a Peppol debit note is an invoice document carrying that code. A credit note has a document of its own, with code 381.

Not every customer takes every correcting document by EDI. Of credit notes, the invoice guide says: "The credit note goes by EDI where the retailer supports it." Check which correcting documents each customer accepts, and in which format, before you send one.

What to do when a customer sends you a debit note

Treat it as a claim to check. A customer's claim may arrive as a debit note, as an invoice for a charge, or as a deduction, and its own terms decide which. Ocado's supplier manual, for example, says its recovery charges "are processed on a monthly basis and invoices are raised in line with the charging structure".

Whatever the customer calls it, start with the same checks. The VAT step depends on what the claim is:

1. Find the invoice it refers to. HMRC's electronic invoicing notice says a document that does a credit note's job must carry "sufficient information to identify the original invoice" and "the same details as the original invoice to which they refer". No invoice reference, no match.
2. Check it against your order and delivery records. The customer has checked its side, in the EDI invoice guide's words: "what it ordered and what its warehouse received." Your order and delivery notes are the other half.
3. Dispute it in time if it is wrong. Read the customer's terms for a deadline. Ocado's is plain: "If a supplier wishes to dispute a charge, the supplier must do so within 30 days of receiving notice of the charge."
4. If it reduces your price, issue your own credit note. In most cases the customer's debit note cannot stand in for it. Issue it within 14 days of refunding the amount or offsetting it against what the customer owes, and reduce your output tax in that VAT period. Accepting the claim is not the trigger.

Step 4 covers reductions in your price. A charge on the customer's own invoice, like Ocado's recovery charges, follows that invoice and the customer's terms.

If the claims keep tracing back to documents that failed a customer's checks, the retail EDI chargebacks guide covers where that usually starts.

Fewer corrections: orders, deliveries and invoices that agree

A correction can start before the invoice is written. Ocado's manual describes the receiving end: "It is vital at this stage that quantities match with purchase order details." When a supplier cannot deliver what was ordered, Ocado asks for the news early: "Shortfalls or changes to the PO must be communicated to the Ocado Supply Chain Team at the earliest opportunity via EDI, Olive, or by contacting the Supply Chain Demand Planner directly."

The advance shipping notice does the same job on the day. Ocado's manual says: "ASNs improve receipt accuracy, reduce invoice matching queries and provide a more accurate view of availability for Ocado customers." The ASN guide covers what goes in one.

The invoice closes the loop. As the EDI invoice guide says: "The order and delivery note references inside the invoice are what let the retailer find both records." For the product numbers on each line, see the GTIN guide.

This is the PDF trap in another form. Every order rekeyed by hand is another chance for a quantity or price to drift. In a Transalis case study on a Scottish drinks company's move from paper to digital EDI, the company's systems manager puts it this way: "Rectifying errors typically entails issuing credit notes for returns and fulfilling mistaken orders."

The best correcting document is the one nobody has to send.

Sending and receiving correcting documents through Transalis

Transalis is a managed outcomes provider for B2B integration, EDI and eInvoicing. Correcting documents travel in the same flow as orders and invoices. As the EDI benefits guide puts it: "EDI can automate orders, invoices, shipping notes, dispatch and returns instructions, tax summaries, debit and credit notes, remittance advice and other master data."

The EDI page sets out the service: "Transalis runs your entire EDI operation as a managed outcome. Every format, every retailer, every ERP. One connection reaches 15,000+ trading partners across 50+ countries, with no software to run and no per-transaction penalty."

Start trading in days, or see the managed service on the EDI page.