VATREC13075 | Credit and Debit notes: Regulation 38ZA - refunds to final consumers

Regulation 38ZA of the VAT Regulations 1995 (SI1995/2518) modifies Regulation 38 to also require businesses to adjust their VAT accounts where there has been a refund by a first supplier of goods, in a supply chain (e.g. manufacturer or importer), to a final consumer of the goods (e.g. consumer); such that the value of the underlying consideration paid by the final consumer on which VAT is due is reduced.

In these circumstances, the legislation places a clear obligation on the parties to adjust their VAT account. Such changes will normally be evidenced by a credit note.

VATSC06660 explains the circumstances where Regulation 38ZA will apply and what is meant by a decrease in consideration.

VATSC06670 explains some of the accounting mechanisms to be used.