The appellant agreed to sell a car to a company named Avocet Hardware (UK) Limited (Avocet) for £7,200 in September 2013. The car was returned on 2 October 2013 because Avocet was not happy with the car. The consideration was not returned and it was agreed that the appellant would supply a replacement car once a suitable one had been identified or refund the consideration. A suitable car was supplied to Avocet in September 2014.
The issue in this case was whether out-put tax in respect of the £7,200 paid in September 2013 ought to have been included in the VAT return for the period ended 31st October 2013 and whether a penalty was due to be paid for failure to do so.
HMRC argued that a payment was received by the appellant in September 2013. That was evidence that the appellant had made a supply. It was the time of the supply and therefore it followed that VAT was due on the supply of the car for £7,200. In
