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If you cannot claim VAT on goods that you don't own, I presume you don't have to pay over the VAT when you sell them. A lot of companies have the phrase "goods not yours until paid for". I really don't think customs are interested unless, of course you're talking about £60k+ but an interesting post.
Neil, interesting tribunal case and one that tests the very basis of accruals accounting. Does this take the world back to the principle of bartering, if cash has not been paid in exchange for goods? Indeed, does this go to the very basis of currency? Have a look at that bank note; the promise might mean that you do not own the assets that backs that promise and the note is worthless!! Difficult concept, particular here in Scotland where there is not the principle of "legal tender". Very interesting problem and challenges that old chestnut; "possession being nine-tenths of the law". Is the whole credit system in doubt or is this a case of the law (or those expressing it) being an [***]?
Stephen Ranscombe ACA TQFE
Lecturer in Accounting
Moray College UHI
I don't think the above two replies get the point. In the case in question, there was no contractual basis for the silver being received - simply putative money laundering. Normally when you sell under a retention of title clause, the intention is that the buyer can re-sell the items with valid title - and that presumably is a taxable supply. What you are trying to ensure by the Retention of Title is that, if the customer goes bust before he has sold the goods, you can get them back (spoiler alert; bitter experience shows that even if you do, they will be unusably damaged).
The recommended wording for a Retention of Title clause used to be, "The goods are at the risk of the buyer from delivery but title does not pass until the buyer has made full and unconditional payment of this invoice and all other amounts owing to the seller".
And it can be worth speaking to a solicitor about RoT clauses. It can be useful to have a right of access to premises to take goods back and also add a requirement they be kept separate and identified (and they need to be in the contract - not just appearing after the contract is made on an invoice - too late).
If you get it wrong the clause does not work and it can amount to a registrable charge void for want of registration.
There has also been a difficult legal issue - that plenty of big buyers require a warranty the seller owns the goods and yet plenty of sellers do not own the goods at the point of resale although some RoT clauses do not allow resale until full payment has been made.
Anyway it sounds like the silver ingots were part of some complex dodgy dealing so not quite your standard retention of title issue.