V3.563 Changing scheme

A retailer may cease to account for output tax on the basis of a retail scheme in three circumstances—

  1.  

    (1)     he may wish to cease using his current scheme for some financial or administrative reason;

  2.  

    (2)     HMRC may refuse to permit him to continue using his current retail scheme; and

  3.  

    (3)     he may cease to meet the conditions of his current retail scheme due to a change in the legislation or a change in his trading pattern.

In each case, ceasing to use the current scheme may result in either adopting a new scheme or commencing to account for output tax on the VAT invoice basis.

General rule

Regulations1 made under VATA 1994 Sch 11 para 2(6) provide that—

  1.  

    (1)     once a person has adopted a retail scheme, he must continue to use it for a period of not less than one year counted from the date of adoption; and

  2.  

    (2)     a change of scheme must take place at the end of any complete year counted from the beginning of the prescribed accounting period in which the current scheme was first adopted.

Example

X has prescribed accounting periods ending on 28 February, 31 May, 31 August and 30 November. He commences to use a scheme on 1 January 2015. He is entitled to change to another scheme on 1 December of any year. However, he cannot do so until 12 months after 1 January 2015 so his first opportunity to change to another scheme falls on 1 December 2016.

HMRC may allow

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