Retail schemes — Apportionment

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Retail schemes - Apportionment
  • Overview of the appointment schemes
  • Apportionment scheme 1
  • Apportionment scheme 2
  • Using the Apportionment scheme with other retail schemes
  • Operating the schemes
  • Apportionment scheme 1
  • Apportionment scheme 2
  • Daily Gross Takings (DGT)
  • Exceeding the turnover threshold
  • More...

Retail schemes - Apportionment

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the rules relating to Apportionment retail schemes 1 and 2. This note should be read in conjunction with the Retail schemes - overview and Retail schemes - specific industries guidance notes.

A business making retail sales can use a retail scheme if they cannot use the normal accounting rules and their turnover does not exceed £130m a year.

The retail scheme used by the business must produce a fair and reasonable result and the business must be able to identify the tax exclusive value of the sale, the applicable VAT rate and be able to produce periodic totals of those amounts.

Overview of the appointment schemes

There are two apportionment schemes that can be used and these have been outlined below.

Apportionment scheme 1

This is the simpler version of the two apportionment schemes and can be used by businesses with a tax exclusive turnover that does not exceed £1m. Businesses using the scheme need to calculate the total value of purchases made at each VAT rate and calculate the percentage of the purchases at each VAT rate. These percentages will be applied to the retail sales in order to calculate the volume of sales that are liable to VAT at the different rates. For example:

Retail purchasesRetail sales
Standard-rated purchases – 45% of total purchasesStandard-rated sales – 45% of total sales
Reduced-rated purchase – 35% of total purchasesReduced-rated sales – 35% of total sales
Zero-rated purchases – 20% of total purchasesZero-rated

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