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VAT retail schemes

11 April 2024

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

Retail businesses use VAT retail schemes, a special set of schemes, to account for VAT. These businesses sell a significant amount of low value and/or small quantity items to the public with different VAT liabilities.

Using these schemes can save businesses a significant amount of time when calculating the VAT due to HMRC on each sale. In many cases, it would be extremely difficult for these businesses to account for VAT using standard VAT accounting. Retailers can calculate VAT due to HMRC at the standard, reduced, and zero rates of VAT as a proportion of sales by using the VAT retail scheme. Usually, they do this on a day-to-day basis.

Several standard VAT retail schemes exist:

  • the point of sale scheme
  • two apportionment schemes
  • two direct calculation schemes

Retailers also have the option to use a bespoke scheme. Retailers with a turnover excluding VAT of £130 million or more must use a bespoke scheme.

Usually, the decision on which retail scheme to use depends on a combination of the scheme that provides the best result for the business in question and the cost of using the scheme. However, HMRC must consider the chosen scheme as fair and reasonable.

Source: HM Revenue & Customs Tue, 09 Apr 2024 00:00:00 +0100

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