VAT retail schemes are a special set of schemes used by retail businesses to account for VAT. The schemes are usually used by businesses that sell a significant amount of low value and/or small quantity items to the public with different VAT liabilities.
The use of the scheme can save businesses a significant amount of time in calculating the amount of VAT due to HMRC on each and every sale. In many circumstances it would be extremely difficult for these businesses to account for VAT using standard VAT accounting. By using the VAT retail scheme, retailers are able to calculate VAT due to HMRC at the standard, reduced and zero rates of VAT as a proportion of sales. Usually this is done on a day by day basis.
There are 3 standard VAT retail schemes:
- Point of Sale Scheme
- 2 x Apportionment Schemes
- 2 x Direct Calculation Schemes
Note, HMRC need to be of the opinion that the chosen scheme is fair and reasonable.