Corrective invoice

What it means

A corrective invoice is a document that changes an invoice already issued and refers to it unambiguously. The VAT Act treats it as an invoice in its own right: it carries its own sequential number, the reference to the original and the data being changed.

Bookkeeping knows it under two names: a credit note lowers the original amount, a debit note raises it. The original invoice does not disappear and is not replaced by a new one with the same number, both stay in the books side by side.

A corrective invoice needs the particulars required by the VAT Act only when it corrects a VAT payer’s tax document. A credit note from a non-payer is an ordinary accounting document that lowers revenue and the receivable but changes no tax, because the original invoice carried none.

How it works in practice

It is issued by whoever issued the original, within the period the Act counts from the event that caused the correction of the taxable amount. It tells the customer by how much and in which period to adjust their deduction.

Fewer particulars are required than on an ordinary invoice: the reference to the original sequential number and the data that change. The document goes into the control statement under corrections, where it is matched to the original by that number.

On a project where the client disputes part of the scope, we advise issuing a corrective invoice for the difference rather than a new invoice for the whole agreed amount. In the accounts sub-ledger we then pair it with the original, so the customer’s open item shows exactly what is still to be paid instead of two separate amounts.

What to watch out for

Anyone who states tax on an invoice owes that tax, even where the supply carried none. A non-payer, or a firm that charged VAT on a reverse-charge supply by mistake, pays tax the customer may not deduct, and the only way back is to correct the document.

Where a discount covers goods at different VAT rates, the corrective invoice has to split the difference by the rates of the original supplies. A single lump sum at the standard rate reduces the tax by more or less than was originally declared, and the mismatch surfaces on both sides at audit.