Credit balance used to offset part of payment. VAT and how to reconcile?

Hello, I received an invoice from a service supplier based in the US for $16 and was subsequently charged $11 on my VISA. It looks like they credited me with $5 on Sept 3rd for overpayment and used it to offset this month's bill of $16 (11+5). Q: how do I account for this? I have created an invoice for $16 in SAGE Accounting for service received but now I can't reconcile. I need to know the proper way to do this so VAT is properly accounted for and so I can reconcile. Thank you. Kind regards,

Hi,

You would need to raise a credit note.

You can find guidance in VAT Notice 700, section 30.7.5.

VAT guide (VAT Notice 700)

Thank you.