VAT retail schemes

Tax Comments Off on VAT retail schemes

VAT retail schemes are a special set of schemes used by retail businesses to account for VAT.  The schemes are usually used by retailers that sell a significant amount of low value and/or small quantity items to the public with different VAT liabilities.

The use of the scheme can save businesses a significant amount of time in calculating the amount of VAT due to HMRC on each and every sale. In many circumstances, it would be extremely difficult for these businesses to account for VAT using standard VAT accounting. By using the VAT retail scheme, retailers are able to calculate VAT due to HMRC at the standard, reduced and zero rates of VAT as a proportion of sales. Usually this is done on a day by day basis.

Standard retail schemes are suitable for most retail businesses. However, there are special arrangements that can be adopted by caterers, chemists and florists.

There are three main categories of standard retail schemes:

  • Point of sale schemes
  • Apportionment schemes
  • Direct calculation schemes

Businesses can use a retail scheme together with the cash accounting scheme and/or the annual accounting scheme. However, the retail scheme cannot be used in conjunction with the flat rate scheme. The flat rate scheme does have a version suitable for retailers. Also, the retail schemes cannot be used with the margin schemes.

Please contact us if you would like to know if one of these schemes would benefit your business.

Lesley Malkin, Audit Partner