Refund a customer

When you give money back to a customer, BusyBee Hub never rewrites the original invoice or its payment. A refund you
explain from your bank feed as a credit note, and a Stripe refund of an invoice that was paid in full, create a **credit
note** for the amount refunded and record the money leaving your account as a separate, outgoing payment allocated to
that credit note. The invoice itself stays exactly as it was: paid, and settled. If instead the sale stands and you just
give the customer's payment back, you can record it as the customer's payment returned: nothing is credited, the
money going back is an outgoing payment against the invoice itself, and the invoice is open again for that amount. Either
way a refund counts on the day the money went back, and BusyBee Hub doesn't go back and rewrite a period you have sent: if
that day is in a VAT return you have already sent, the difference goes on your next return as a correction (the two things
that can reach back are a CIS deduction you correct yourself, below, and a Stripe refund that later fails, which can move
the Self Assessment figures of the tax year it was recorded in: see "If Stripe can't pay a refund"). A Stripe refund of an
overpayment, or of an invoice that wasn't paid in full, gets no credit note: see below.

From your bank feed

Explain the outgoing transaction as Customer refund. You can:

- pick an existing, issued credit note with money still owed back on it, or
- create a credit note from an invoice, sized to the transaction's own amount, or
- when the sale stands and the customer simply gets their payment back, choose the customer's payment is returned:
nothing is credited, the invoice is open again for that amount, and (if you use VAT cash accounting) the VAT that
payment carried comes back out of your return on the day the money went back. Only money that did not come through
Stripe can be returned this way: if the customer paid by card through BusyBee Hub, refund them from your Stripe
Dashboard instead. If the invoice holds money to hand back because of a credit note you made after it was paid, that
credit note has to be refunded first; and a return can't be dated before a credit note on the invoice (use a credit
note for that). The invoice is open again, so its payment reminders can start again.

Whichever you choose, BusyBee Hub checks the refund doesn't exceed what's actually refundable — what the customer paid,
less anything already credited or refunded — so you can't refund more than they're owed back. A payment that a return
depends on can't be deleted (or un-explained) until the return is: take the return back first.

A Stripe refund or a lost dispute

If a customer pays online and you refund them from your Stripe Dashboard, BusyBee Hub works out what the money was for,
on the day it went back:

- Money for the sale, on an invoice paid in full. It creates a credit note dated that day and records the refund as
an outgoing payment allocated to it. The original payment is never deleted or shrunk, the invoice isn't reopened, and
reminders don't restart.
- Money the invoice never asked for. If the customer paid more than the invoice was for (they paid twice, or paid
while you were recording a bank transfer), that extra is returned first. It is recorded as a returned overpayment: no
credit note, and no change to your VAT, because an overpayment isn't payment for anything you supplied.
- An invoice that wasn't fully paid. If you've deleted another payment on it by hand, or the customer only
part-paid, a credit note would say you had agreed to charge less, and nobody has said that. So no credit note is
created: the refund is recorded as the customer's payment being returned, dated the day the money went back, and the
invoice is open again for what they now owe (if you use VAT cash accounting, the VAT that payment carried comes back
out of your return on that day). Its payments list shows the refund as a negative line, and the Pay online button
comes back. If you have in fact cancelled the sale, create a credit note for the invoice afterwards.

If you lose a card dispute, your customer's bank has taken the money back and nobody has agreed to reduce the sale. The
money taken back first settles any refund still owing on a credit note you've already made on the invoice; the rest is
treated by the last rule, whether or not the invoice was paid in full: the payment is recorded as returned, with no
credit note, and the invoice is open again for what the customer now owes. You can then chase it or, if you cancel the sale,
create a credit note for the invoice. If you use VAT invoice accounting and the debt stays unpaid, bad debt relief
(claimed once it is six months overdue) is a manual adjustment on your open VAT return: see
Fix a mistake on a VAT return.

Stripe keeps its own fee on a refund, so the fee expense you were charged stays as it was. See
Get paid online for how online payments work.

If Stripe can't pay a refund

Now and then the customer's bank or card issuer can't take a refund (the card has been closed, say), or you cancel it in
your Stripe Dashboard. Stripe puts the money back in your Stripe balance (it can take up to 30 days; a refund that was
still waiting for funds never took it) and tells BusyBee Hub, which tells you in a notification, because your customer has
not been repaid. In your books:

- The credit note stays, and what the refund had paid on it is owing to your customer again. Repay them another way and
record it as Customer refund from your bank feed, or refund again from Stripe: either settles the same credit note.
- A payment the refund had taken back from the invoice (an invoice that wasn't fully paid) is recorded as received
again, dated the day the refund failed. If your customer has paid the invoice since, only what the invoice still asks
for goes back on it; the rest is an overpayment, held as received on the day the refund failed (it is not a sale, so it
carries no VAT), and you repay it from your bank feed.
- A returned overpayment is held again: it is recorded as received on the day the refund failed.

A VAT return you've sent is not changed by the failure: it keeps the credit note's reduction of VAT and carries nothing new
for the refund, and a payment recorded again counts in the VAT period of the day it failed (that period's return carries it
as a correction if it was already sent). Your Self Assessment figures follow the payments: a refund payment that is removed
(one made on a credit note) stops counting from the day it was recorded, a payment recorded again or an overpayment held
again counts from the day it failed, and because quarterly updates are cumulative the next one carries the difference; an
update you have already sent is not sent again. If the refund was recorded in an earlier tax year than the day it failed,
that year's figures move, after its last quarterly update: its final declaration carries the difference, and a final
declaration you have already sent is amended.

If the refund failed because your customer disputed the payment, respond to the dispute in Stripe and don't repay your
customer another way until it is decided: Stripe recommends accepting or challenging it, and if you lose it the money your
customer's bank takes back settles the credit note's refund, so a second repayment would pay them twice.

Credit notes and VAT

If you aren't VAT-registered, your credit notes carry the line "This is not a credit note for VAT". HMRC's guidance says a
credit note issued without a VAT adjustment should say so (VAT Notice 700, section 18.2.3),
and yours adjusts none.

How a refund or a dispute shows on the invoice

An invoice's status says what your customer owes, so a refund that goes through a credit note doesn't change it: the invoice stays Paid, and a badge beside the
status says what came back (Partly refunded £4.00, Refunded £10.00). On the invoice's page the Payments card adds a short summary (what was paid, what was
credited and refunded, what your customer paid net, and what is still owed) and lists the refund with a link to its credit note. The credit note reads Refunded once
the money has gone back.

If a payment is taken back from the invoice itself (an invoice that wasn't fully paid, a payment you returned to your customer, or a lost dispute), the invoice is owed again
and reads Sent, Partially paid or Overdue, with a badge that says why: Payment returned or Dispute lost, and how much of what was taken back is still owed. The summary
shows what was returned, on which day and by whom (Stripe or you); a payment Stripe returned to the invoice because it could not pay a refund shows as Restored, and on a
CIS invoice the summary also shows CIS deducted, so the lines add up to the balance. While a dispute is still open the invoice reads Disputed, ahead of Overdue, until
Stripe settles it, so it also appears under the Paid filter: see Get paid online.

Your customer isn't told any of this on the invoice they were sent: it still shows what they paid and what they owe.

If the invoice had CIS deducted

A refund of a payment made under CIS is handled like any other: BusyBee Hub creates a credit note for the whole invoice
value that the payment covered (a £1,000 payment on a £1,200 invoice with £200 CIS gives a £1,200 credit note) and your
VAT comes down on the day the money went back. A refund you explain from your bank feed on an invoice that was paid in
full works the same way: £500 given back on that invoice is a £600 credit note, the money plus the deduction it never
included. A credit note on a CIS invoice takes back its own share of the deduction, the part of the CIS that came off
the labour it credits (a £480 credit note for £400 of labour takes back £80), so the invoice then asks for that much
less and no money goes back for that share. If you make a credit note yourself, keep the Labour tick on the lines
that were labour: that is how BusyBee Hub knows how much of the deduction to take back. The CIS your contractor deducted is the contractor's to correct, so
BusyBee Hub leaves it in your CIS records until your contractor sends you a corrected payment and deduction statement.
When it arrives, update the deduction on the CIS page: the change lands in the month the payment was received
in, as your contractor's corrected statement does, so that earlier month's figures change. On the cash basis your income still
includes the amount that was deducted until then; on the accruals basis the credit note takes the whole sale off your
income, and its share of the deduction comes off the CIS amount owed to you at the same time. If the money goes back as a returned payment instead (an invoice that wasn't
fully paid, a lost dispute, or a payment you return by hand from your bank feed), the invoice reopens and the CIS deduction already recorded stays in your CIS records in
the same way.

On the cash basis

If you use cash basis accounting, a credit note only reduces your turnover once the money has actually gone back —
issuing the credit note on its own doesn't. Once both exist, your income and VAT come down together, dated the day the
refund happened. A refund of an overpayment lowers your income by the amount returned and leaves your VAT alone; a
refund that reverses a payment on an invoice that wasn't paid in full takes back the income and, if you use VAT cash
accounting, the VAT that payment had carried, on the day of the refund.

See also Refund an expense for money coming back to you from a supplier.