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Goods returned, transaction still VATable?

Should client account for VAT when goods returned?

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Client supplies a product, let's say it's a very expensive TV. Customer pays via their credit card. Client uses PayPal as their merchant to process the card payment.

Sometime later customer finds that they are not using the TV. Says there is a fault & returns it to client. Client inspects & finds no fault and invites customer to pick up his TV. Customer refuses to pick up and insists on a refund. Client says no refund, as there is no fault.

Customer opens dispute with credit card company, which is referred to PayPal who decide to refund the customer but NOT debit the client.

So at this stage customer has his funds back, client has the funds as well and also has the TV.

Question is does client have to account for VAT on the sale? A supply of goods was initially made, but those goods have been returned.

I’m erring towards that they do, particularly in light of the deposits forfeited changes from 1 March 2019. Wondering if anyone has any contrary views?

As a side note TV is virtually brand new and client can sell it again, with a small discount.

Replies (3)

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By Paul Crowley
27th Nov 2020 16:04

Deposits seems a fair comparison

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By Truthsayer
27th Nov 2020 18:43

A supply of goods was made, was paid for, and the client made no refund. Therefore the VAT remains payable. The fact that the TV was returned is in my view irrelevant.

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blue sheep
By Nigel Henshaw
28th Nov 2020 07:19

2 separate supplies - the sale which was VATable and the return which is also VATable in reverse, it just so happens that the return was at nil value - what would you have done if for example your client had agreed to partially refund the customer?

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