Retail schemes — overview

Produced by Tolley

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

  • Retail schemes - overview
  • Standard schemes
  • Point of Sale scheme
  • Apportionment Scheme
  • Direct Calculation scheme
  • Mixing schemes
  • Changing schemes
  • Retrospective change
  • Daily Gross Takings (DGT)
  • Death, bankruptcy or incapacity
  • More...

This guidance note provides an overview of the main VAT principles governing the use of retail schemes. This note should be read in conjunction with the following guidance notes:

  1. Retail schemes - Point of Sale

  2. Retail schemes - Apportionment

  3. Retail schemes - Direct Calculation

  4. Bespoke retail schemes

  5. Retail schemes - specific industries

  6. Retail schemes - Daily Gross Takings (DGT)

  7. Coupons and vouchers

  8. Cash backs and loyalty schemes

VATA 1994, Sch 11, para 2(6); SI 1995/2518, regs 66–75

De Voil Indirect Tax V3.551–V3.576

Retail schemes are intended to be used by businesses that cannot be expected to use the normal invoice accounting rules for supplies made. The scheme can only be used for retail sales. Retail schemes are usually used for low value supplies that are made to significant number of customers. If a business makes retail and non-retail sales, it will be expected to be able to identify both types of supply in order to account for VAT in the normal way on any non-retail supplies made.

Sales to other VAT registered customers should not be included in the a retail scheme, unless these are occasional cash sales, provided by businesses who may supply goods to VAT registered customers, such as garages and DIY stores.

HMRC considers that the need to use retail schemes has greatly diminished over recent years with the advent of more sophisticated technology, such as bar codes and EPOS tills, and therefore retailers are expected to use this technology in order to determine the correct VAT rate applicable to goods and services supplied when the customer pays for the item, rather that rely on a retail scheme.

Retail schemes cannot be used in conjunction with the flat rate scheme for small businesses.

There are various types of schemes in operation and these are explained below.

Standard schemes

These are the types of standard schemes that are available:

  1. Point of Sale

  2. Apportionment, and

  3. Direct Calculation

The standard schemes are only available to businesses with an annual VAT inclusive turnover

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