How VAT retail schemes work
If you sell goods you must calculate how much VAT to record in your VAT account.
For goods sold inclusive of VAT, you must deduct the VAT you have to record. For goods sold exclusive of VAT, you must add it.
VAT retail schemes can make calculating your VAT simpler. Instead of calculating the VAT for each sale you make, you do it once with each VAT return.
There are 3 standard VAT retail schemes:
- Point of Sale Scheme – you identify and record the VAT at the time of sale
- Apportionment Scheme – you buy goods for resale
- Direct Calculation Scheme – you make a small proportion of sales at one VAT rate and the majority at another rate
If your turnover excluding VAT is over £130 million you must agree a bespoke retail scheme with HM Revenue and Customs (HMRC).
You can use a retail scheme together with the Cash Accounting Scheme and the Annual Accounting Scheme.
You can’t use retail schemes with the Flat Rate Scheme.
Joining and using a scheme
You can join a retail scheme at the beginning of any VAT period. You don’t need to tell HMRC.
It’s up to you which scheme you join. The calculations you have to do vary for each scheme.
You must provide an individual VAT invoice if a customer asks for one.
Changing and leaving a scheme
You can leave a scheme at the end of any VAT period. If your turnover rises above £130 million you’ll have to leave the scheme immediately.
You can change to another scheme after 1 year of joining a scheme.
Caterers, pharmacists, and florists
There are separate rules if you’re a: