There are very limited circumstances where a no refund policy is legal and a shop cannot refuse to refund faulty or damaged goods except where the goods have been sold at a reduced price because of that particular fault or damage.
For example - you buy a skirt reduced from �50 to �5 and there is a little tag stating it is reduced because the zip is faulty.
It is illegal to put a notice in the shop window stating 'no refunds' with no further explanation.
However, a shop is not obliged to refund just because the buyer has changed their mind, or the gift recipient doesn't like it - the shop is only legally obliged to refund if the goods are faulty, not as described or unfit for the purpose they were sold (unless there is a sign inthe shop stating goods can be returned for a refund for any reason within a time frame).
It is mainly the Sale of Goods Act 1979 and the Unfair Terms in Consumer Contracts Regulations