Goods held with me on consignment — when does VAT actually kick in?

Under a consignment arrangement, stock physically moves into another party's warehouse or store (an agent or a retailer), but legal ownership stays with the original supplier until an actual sale to an end customer happens. Since a taxable "supply" of goods requires the transfer of ownership or the right to dispose of them as owner, simply moving the stock into the other party's premises isn't a taxable event on its own — the supplier keeps treating those goods as its own stock until they're actually sold, even though they're no longer physically in its possession.

There's a ceiling that can't be exceeded, though: the general date-of-supply rule sets a time limit — if the goods sit unsold, with no invoice and no payment, for 12 months from the original delivery date, the supply is deemed to have happened at the end of that 12-month period regardless of whether an actual sale has taken place. In other words, a consignment arrangement can't be used to defer VAT indefinitely — as soon as the actual sale occurs, or the 12 months run out, whichever comes first, a proper tax invoice must be issued and output VAT accounted for right away. RASEEKH reviews consignment agreements and stock records so VAT timing is set correctly from the start.