V3.135 Tax point—goods on approval, sale or return, or similar terms
The general rules described in V3.131–V3.134 apply in a modified and abridged form (set out below) to goods sent or taken on approval, sale or return, or on similar terms.
Goods are not delivered on approval, sale or return or similar terms unless the supplier makes an irrevocable offer to sell the goods which the recipient can approve, accept or adopt1. In a case in which a mail order company permitted customers to return goods within 14 days of delivery provided that they were in 'new condition', it was held that sales subject to a condition are not sales on approval2. In a later case, which involved distance selling over the internet, the tribunal considered3 that the Distance Selling Regulations4 gave the customer the absolute right to cancel the sale agreement within seven days, which was the essential ingredient of a supply on approval, or sale or return. On appeal, however, the Court of Session5 considered that, although the respondent's terms and conditions were subject to the statutory right of cancellation, they nonetheless determined the nature of the transaction under which the goods are supplied. The provisions relating to payment, ordering and returns all indicated that the nature of the online transaction was one of outright sale. The Distance Selling Regulations governed the transaction only to the extent of conferring on the purchaser an unqualified right of cancellation of the sale. HMRC (somewhat belatedly) amended its guidance on whether or
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