Mail order traders: Agents’ own purchases (AOP): Timing of AOP discount
The values of the commissions/discounts earned are usually posted to a separate commission account and effectively held in abeyance until “credited” to the agent when the amount is claimed by the agent either:
- as a reduction against their balance;
- a monetary payment; or
- to pay for further goods.
It is common practice for companies offering commission to post it to agents’ accounts on the basis of payments received rather than sales made. All require that the full debt be paid so that if, for example, £100 worth of goods are sold, the agent will remit £100 to the company, which will then credit the agent’s commission account with £10 that may be claimed later (assuming a 10% commission rate).
Following the case of Freemans (ECJ C-86/99), the mail order company can only claim credit for the discount given to the agent for their own purchases at the time the agent uses their accumulated commission in one of the three ways detailed above and not when the commission is posted to the agent’s commission account.