E-invoice credit notes in the UK: how they work in Peppol

In Peppol, a UK credit note is sent as a UBL CreditNote document with type code 381. Amounts stay positive (the document type does the crediting), and it should reference the original invoice's number and issue date in cac:BillingReference. Peppol will also accept a "negative invoice" instead, and every Peppol receiver must be able to handle both.

Below: the two options, what HMRC requires on a credit note, a validated example, and the errors to watch for.

Two ways to credit in Peppol

Peppol BIS Billing 3.0 supports negative totals, so there are two routes:

1. Credit note. CreditNote document, type code 381. Peppol says "the function of crediting or debiting is controlled merely by the business document type … while the representation of the amount, including its sign, is not affected." To credit £170, you send £170.
2. Negative invoice. Invoice document, type code 380, with negative quantities and amounts. Here the crediting is "controlled merely by the sign … of the amount concerned". The unit price stays positive.

Peppol is explicit about who must support what: "Invoice-generating systems may implement either option, while invoice-receiving systems have to support both of them."

For UK VAT purposes, HMRC's guidance is written around credit notes, so a 381 credit note that meets HMRC's content rules is the cleaner route for most businesses. Whether the UK mandate will prefer one approach is not yet confirmed.

Credit note type codes

Peppol allows these codes for cbc:CreditNoteTypeCode:

Code	Meaning
381	Credit note
81	Credit note related to goods or services
83	Credit note related to financial adjustments
396	Factored credit note
532	Forwarder's credit note

Use 381 unless you have a reason not to. Putting 380 in a CreditNote fails BR-CL-01 ("The document type code MUST be coded by the invoice and credit note related code lists of UNTDID 1001.") and PEPPOL-EN16931-P0101 ("Credit note type code MUST be set according to the profile.").

What HMRC requires on a credit note

Paragraph 18.2.3 of VAT Notice 700 says a valid credit note must "reflect a genuine mistake or overcharge or an agreed reduction in the value of the supply", "give value to the customer", and show clearly:

• the identifying number and date of issue
• the name, address and registration number of the supplier
• the name and address of the customer
• a description identifying the goods or services credited
• the quantity and amount for each description
• the total amount credited, excluding VAT
• the rate and amount of VAT credited (expressed in sterling)
• "the number and date of the original VAT invoice or invoices relating to the supply"

VAT Notice 700/63 adds that electronic credit notes "must contain both: the same details as the original invoice to which they refer; sufficient information to identify the original invoice".

If you and your customer agree not to adjust VAT, HMRC says the document should state "This is not a credit note for VAT". The rate of VAT on a credit note is "the one which was in force at the time of the tax point of the original supply".

A valid UK credit note in UBL

This credits 2 hours of consultancy (£170 plus £34 VAT) from invoice INV-2026-0142. We checked the complete document against the UBL 2.1 CreditNote schema, the EN 16931 UBL rules and the Peppol BIS Billing 3.0 rules, with no errors. The parties are the same as on the original invoice and are left out here.

<CreditNote xmlns="urn:oasis:names:specification:ubl:schema:xsd:CreditNote-2"
            xmlns:cac="urn:oasis:names:specification:ubl:schema:xsd:CommonAggregateComponents-2"
            xmlns:cbc="urn:oasis:names:specification:ubl:schema:xsd:CommonBasicComponents-2">
  <cbc:CustomizationID>urn:cen.eu:en16931:2017#compliant#urn:fdc:peppol.eu:2017:poacc:billing:3.0</cbc:CustomizationID>
  <cbc:ProfileID>urn:fdc:peppol.eu:2017:poacc:billing:01:1.0</cbc:ProfileID>
  <cbc:ID>CN-2026-0007</cbc:ID>
  <cbc:IssueDate>2026-10-27</cbc:IssueDate>
  <cbc:CreditNoteTypeCode>381</cbc:CreditNoteTypeCode>
  <cbc:Note>Credit for 2 hours invoiced in error</cbc:Note>
  <cbc:DocumentCurrencyCode>GBP</cbc:DocumentCurrencyCode>
  <cbc:BuyerReference>FIN-OPS-77</cbc:BuyerReference>
  <cac:OrderReference>
    <cbc:ID>PO-48213</cbc:ID>
  </cac:OrderReference>
  <cac:BillingReference>
    <cac:InvoiceDocumentReference>
      <cbc:ID>INV-2026-0142</cbc:ID>
      <cbc:IssueDate>2026-10-20</cbc:IssueDate>
    </cac:InvoiceDocumentReference>
  </cac:BillingReference>
  <!-- AccountingSupplierParty and AccountingCustomerParty as on the invoice -->
  <cac:TaxTotal>
    <cbc:TaxAmount currencyID="GBP">34.00</cbc:TaxAmount>
    <cac:TaxSubtotal>
      <cbc:TaxableAmount currencyID="GBP">170.00</cbc:TaxableAmount>
      <cbc:TaxAmount currencyID="GBP">34.00</cbc:TaxAmount>
      <cac:TaxCategory>
        <cbc:ID>S</cbc:ID>
        <cbc:Percent>20</cbc:Percent>
        <cac:TaxScheme><cbc:ID>VAT</cbc:ID></cac:TaxScheme>
      </cac:TaxCategory>
    </cac:TaxSubtotal>
  </cac:TaxTotal>
  <cac:LegalMonetaryTotal>
    <cbc:LineExtensionAmount currencyID="GBP">170.00</cbc:LineExtensionAmount>
    <cbc:TaxExclusiveAmount currencyID="GBP">170.00</cbc:TaxExclusiveAmount>
    <cbc:TaxInclusiveAmount currencyID="GBP">204.00</cbc:TaxInclusiveAmount>
    <cbc:PayableAmount currencyID="GBP">204.00</cbc:PayableAmount>
  </cac:LegalMonetaryTotal>
  <cac:CreditNoteLine>
    <cbc:ID>1</cbc:ID>
    <cbc:CreditedQuantity unitCode="HUR">2</cbc:CreditedQuantity>
    <cbc:LineExtensionAmount currencyID="GBP">170.00</cbc:LineExtensionAmount>
    <cac:Item>
      <cbc:Name>Consultancy services, September 2026</cbc:Name>
      <cac:ClassifiedTaxCategory>
        <cbc:ID>S</cbc:ID>
        <cbc:Percent>20</cbc:Percent>
        <cac:TaxScheme><cbc:ID>VAT</cbc:ID></cac:TaxScheme>
      </cac:ClassifiedTaxCategory>
    </cac:Item>
    <cac:Price>
      <cbc:PriceAmount currencyID="GBP">85.00</cbc:PriceAmount>
    </cac:Price>
  </cac:CreditNoteLine>
</CreditNote>

Differences from an invoice:

• the root element and namespace are CreditNote / CreditNote-2
• cbc:CreditNoteTypeCode instead of cbc:InvoiceTypeCode
• cac:CreditNoteLine and cbc:CreditedQuantity instead of cac:InvoiceLine and cbc:InvoicedQuantity
• there is no cbc:DueDate at the top of a UBL credit note
• a project reference, if used, goes in cac:AdditionalDocumentReference with document type code 50, because cac:ProjectReference does not exist in a credit note

The payable amount is positive (£204). It is what the supplier owes the customer, or what is offset against future invoices.

Referencing the original invoice

cac:BillingReference is BG-3, "Preceding invoice reference". Peppol's own rules do not require it on a credit note. But HMRC requires the number and date of the original invoice, so treat it as mandatory for UK use. Peppol says the issue date "shall be provided in case the preceding invoice reference is not unique". Always including it is simplest.

To credit several invoices, repeat cac:BillingReference. For bulk corrections across many invoices, Peppol suggests the invoicing period (BG-14) with an explanatory note instead.

If you include cac:BillingReference without an invoice number, two rules fire: BR-55 ("Each Preceding Invoice reference (BG-3) shall contain a Preceding Invoice reference (BT-25).") and UBL-SR-07 ("If there is a preceding invoice reference, the preceding invoice number shall be present").

Common credit note errors

Negative prices. Sending <cbc:PriceAmount>-85.00</cbc:PriceAmount> fails BR-27: "The Item net price (BT-146) shall NOT be negative." It usually also breaks PEPPOL-EN16931-R120 (line amount = quantity × price). Keep the price positive. Only quantities and amounts carry a sign, and on a 381 credit note they are normally positive.

Double negatives. Negative amounts on a 381 credit note credit a credit, which is a debit. Some systems export credit notes as negatives by habit. The totals will still validate, so this error reaches your customer's books unless you catch it.

Totals mismatch. BR-CO-10 to BR-CO-16 apply to credit notes just as to invoices. See BR-CO-15 explained.

Reverse charge credits. Use AE coding and HMRC's reverse charge credit note wording. See reverse charge construction e-invoices.

What is not yet confirmed

The UK mandate covers VAT invoices from April 2029. How credit notes, debit notes and negative invoices will be treated, and whether a UK specification will make the original invoice reference mandatory in validation, has not been confirmed. Check the timeline after the roadmap at Budget 2026 on 28 October 2026.

What to do now

• Decide whether your system will issue 381 credit notes or negative invoices, and test that it can receive both.
• Make sure every credit note carries the original invoice number and date.
• Check credit notes are exported with positive amounts and positive prices.
• AP teams: make sure your matching logic links credit notes to invoices via BG-3. See accounts payable and e-invoicing.