New rules for credit notes came into effect in September 2019.
You are more likely to reduce the price of goods than increase them, for example if the goods are faulty.
Credit notes can reduce the VAT accounted for on the original invoice.
Since 1st September 2019 you can only reduce the output VAT on your VAT return if an actual refund has been made.
This could be making a payment to the customer, or offsetting the credit against other invoices.
The new rules also state that you must issue a credit note to the customer within 14 days of giving a refund.
You must ensure that the refund and credit note are issued in the same VAT period as the invoice.
If both you and your customer agree, you can issue a credit note without adjusting the original VAT charge.
This can be beneficial if the customer is able to fully claim input tax on the sales invoice.
If you increase the cost of the goods you must issue a debit note to your customer within 14 days of the date the price change is agreed.
Failing to issue a debit or credit note within these limits is a mistake that needs to be corrected under the error correction procedures.