Statement of Practice B6
Published 31 March 1978
© Crown copyright 1978
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Certain traders sell goods on special terms whereby they retain the title to the goods until payment is made. The accountancy bodies have advised their members that, for accountancy purposes, if the circumstances indicate that the reservation of title is regarded by the parties as having no practical relevance except in the event of the insolvency of the buyer, the goods should, notwithstanding the strict legal position, normally be treated as purchases in the accounts of the buyer and sales in the accounts of the supplier.
HM Revenue and Customs (HMRC) have agreed that for sales subject to reservation of title the above recommended accountancy treatment will be accepted for tax purposes provided that both parties to the contract follow it.
The sale of goods subject to reservation of title as described above is to be distinguished from the supply of goods as consignment stocks eg, on a sale or return basis. Goods supplied as consignment stocks are normally to be treated as stock in the hands of the supplier until disposed of by the consignee.
Note: first publication by Consultative Committee of Accountancy Bodies, Technical Release No 192 dated September 1976. Republished in the HMRC Press Release dated 18 June 1979, Appendix B(1).