What the Dixons does ‘supply of goods’ mean?

Following a recent judgment by the Court of Justice of the European Union (‘CJEU’), a retailer can be deemed to have supplied goods even where the customer has failed to pay for them.

The recent case of Dixons Retail plc v Revenue and Customs Commissions has clarified what ‘supply of goods’ means and it has been held that it should be interpreted broadly and objectively on the facts of the case.  In this case Dixons, the well-known electrical goods retailer, had an agreement with American Express Europe Limited and NatWest Bank plc (‘the Banks’) whereby the Banks would guarantee payment to Dixons of payments made to it using specific credit cards.  Regardless of whether or not those credit cards had been used fraudulently, provided Dixons followed set procedures, the Banks were obligated to guarantee payment.

The Banks made a number of payments to Dixons under this arrangement and Dixons paid VAT on those receipts on the basis that VAT would have been paid on those transactions had they been genuine.  Dixons sought repayment of the VAT which it paid and argued that the payments received from the Banks were comparable to insurance payouts, payouts which would not attract VAT (as determined in a previous case).

It was held that what constituted a supply of goods should be considered objectively and as Dixons had physically transferred the ownership of goods to a customer (albeit one who had obtained the goods through fraudulent means), that constituted a supply of goods.

This case highlights the importance for businesses to have both their customer facing terms and conditions in place as well as those which govern their relationship third parties who are providing them with services.  In this case the CJEU held that as Dixons had failed to distinguish between the supply of goods to its customers and the receipt of services from the Banks, it was only able to conclude that the payment received from the Banks were in respect of the supply of goods.

For advice and assistance in producing your businesses’ terms and conditions, contact the Forbes Solicitors’ Business Law department or call 0800 037 4628.

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