VATSC03520 - Identifying a supply: Supplies of services for consideration: Cancellation of a supply

The VAT Act 1994, section 6 refers to the time a supply is “treated” as being made - see also VATTOS.

VAT Act 1994 and Regulations do not explicitly provide for a definition of cancellation.

Our view for services is; once a supply of services has been made it cannot be unmade and cancelled.

Cancellation of a supply of goods may at first seem less clear as obviously goods can be returned to the supplier.

The High Court in Liverpool Commercial Vehicles Ltd [1984] BCLC 587 looked at the VAT treatment of repossessed goods and whether the original supply was cancelled or not.

The Judge concluded:

“I can see no ground on which a delivery of goods pursuant to a contract which contains a title retention clause and which constitutes a supply in respect of which VAT has become due within the clear terms of the legislation can later be said not to constitute a supply because the goods are repossessed by the vendor”.

From this we can see that once a supply is made it cannot be cancelled if the goods are returned or repossessed. The European Court of Justice (ECJ) (Almos (C-337/13)) has also made it clear that where there is a partial refund then that cannot be a cancellation of the original supply.

VATSC10130 explains how to treat returned goods in more detail.

We therefore consider that a supply can only be cancelled after the “chargeable event” but before it physically takes place.