Legal Question in Administrative Law in United Kingdom

I'm selling a car, a couple came to see it, agreed to buy it but wanted it taxed - they gave us a deposit and arranged to come back at the end of the week to collect it and pay the balance. They duly arrived, signed all the paperwork, paid the balance and left. Half an hour later they were back saying that there was a problem with the car which they wanted fixed and that they would take back the balance paid, gave us back all the paperwork and agreed to come back when we had fixed the problem which only took a couple to days to do during which time they rang to inform us that they had changed their minds and didnt want the car after all!! We have paid for the tax at their request from the deposit money(which also involved a fee to reinstate the insurance) and obviously wont be able to get a full refund for that, we have turned prospective buyers away because it was "sold"and will have to pay to re-advertise and we will now have to pay to get a replacement log book issued. They are now threatening us with the small claims court if we dont return the deposit in full - are we obliged to do this? I feel that by the very nature of it being a deposit it would be non refundable but am prepared to compromise and return say 50%

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