You should not use CIS on a credit note as CIS is calculated on a cash basis and is not claimed by HMRC until the invoice is marked as paid.
Is the credit note you wish to raise in relation to an invoice you have already raised to a contractor?
clarification required please
say invoice raised for £1000 labour only
contractor customer settles the invoice
£800 paid to you as sub- contractor , and £200 to HMRC.
later your customer wants 100% of the invoice value back.... poor workmanship.
You as Sub contractor raise credit note , £1000 to recognise refund .
Assume that as subcontractor you will not be doing future work for this customer.
The Contractor will l want the credit note settled , by you
£1000 then paid to Contractor
the CIS scheme does not allow for a credit of 20% tax.
effectively you the supplier of labour will have NIL £sales
but £200 sitting in the HMRC CIS account, to be offset against eventual tax liability
your cash flow is £800 in £200 in..... sitting with HMRC and £1000 out
you will have the pain of £200 now , relieved when £200 less tax paid later
unless customer will give you extended time to pay him £1000 !!!
That £200 tax paid was what I was trying to avoid except it was a good deal more. Looks like I'll have to swallow the tax until HMRC deign to give us our rebate.