VAT Retail Schemes

VAT retail schemes can help make calculating your VAT easier by calculating your VAT once with each VAT return rather than for each sale you make. For goods sold that are inclusive of VAT, you deduct the VAT you must record. Whereas for goods that are sold exclusive of VAT you must add the VAT you need to record.

There are 3 standard VAT retail schemes:

Point of Sale Scheme – You can use this scheme if you identify and record the VAT at the time of sale. To calculate VAT using this scheme add up all the sales for each different VAT rate eg. 20%, 5%, Exempt, within the VAT return period you are calculating. Then for all 20% rated sales divide by 6. For any goods sold at 5% divide sales by 21.

Apportionment Scheme – You can only use this retail scheme if you buy goods for resale. You cannot use this scheme if you provide any of the following:

  • Services
  • Goods that are made by yourself
  • Catering services

To qualify for this scheme your turnover, Excluding VAT must not be more than £1 million per year.

Direct Calculation Scheme – You might want to use this scheme if you make a small proportion of sales at one VAT rate and the majority at another rate. Like the apportionment scheme, your turnover excluding VAT can not be more than £1 million a year

If you already use either the Cash accounting scheme or the Annual accounting scheme you can use one of the retail schemes as well. However, if you are using the Flat Rate scheme you are unable to use any of the retail schemes. You do not need to tell HMRC that you are using a retail scheme, you can just join one at the beginning of any VAT period. The decision is yours when it comes to which scheme you join but bear in mind that the calculations for each scheme vary and you will need to work this out. It is also useful to know that you must provide a VAT invoice if a customer asks for one. If you wish to change to a different scheme, you can after 1 year of joining a scheme.


Erin Butler PJCO Peter Jarman
Erin Butler

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