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Where the amount of consideration payable under a transaction is carried out by a set-off arrangement, eg if goods are taken in part exchange, there are often two separate supplies involved by way of barter and therefore it is necessary to identify these mutual supplies so that VAT is charged and accounted for in each direction¹.

A mutual supply may be made when persons manufacture an article from material supplied by their customer, eg when jewellers rework a gold bracelet to produce a new article. If the gold bracelet is taken into a common stock, the traders supply the new article and the customer supplies gold (which was the case in Babber²). If the customer's gold is used in making the new article, the traders may make a supply of labour only, or labour and materials, if additional gold is used from stock in making the new article. The customer makes a supply only if a surplus of gold arises in making the new article and the traders take it into stock rather