This guidance advises on how to create a credit note for an unpaid invoice. This can be used if a customer cancels their order with you before paying. Because you have issued the invoice to the customer HMRC requires a record to be kept and therefore shouldn’t be deleted.
Creating the Credit Note
To start, go to Sales > Select the invoice > Click the Refund button at the bottom. On the next page click the second option Create a credit note for this invoice followed by clicking the third option No money has changed hands, use the credit note to settle the invoice. When you’re ready, click the Refund button at the bottom. You’re then taken to the credit note, this has automatically been applied to the customer’s original invoice and no money is now due.