If an item is being returned, this can be marked within the Layer through the Delivery Manager. From the Sales Order, click onto Deliveries and then click into the date beside the item that is being returned.
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From here, click on Register Return which will then change to saying Awaiting Return - Click to Reverse.

Within the Stock tab, click on Returns in the left-hand side of the screen.

This will bring up the Pending Returns screen, where all the pending returns will be listed and can be Marked as Received once they have been selected.

A pop up will appear, allowing you to select to put the returned items on hold if you wish to. Then click Process Returns and the pop up will disappear and the items will successfully have been returned within the system.