VAT retail scheme

This scheme can be utilized by businesses who sells goods. It is required to be calculated the VAT amount which is to be recorded in the VAT account.
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.
If your turnover excluding VAT is over £130 million you must agree a bespoke retail scheme with HM Revenue and Customs (HMRC).
This scheme can’t be used with the Flat Rate Scheme.
There are 3 standard VAT retail schemes

1. Point of Sale Scheme

You can use this scheme if you can identify the VAT rate for goods sold at the time of sale, eg you have an electronic till that does this for you.
You’ve sold £24,000 worth of 20% rated goods and £105 worth of 5% rated goods.

  • £24,000 / 6 = £4,000
  • £105 / 21 = £5

You need to record a total of £4,005 for the VAT return period.

2. Apportionment Scheme

You can only use this scheme if you buy goods for resale only.
In the VAT period you buy goods at the following VAT rates:

  • £16,000 of goods at 20%
  • £1,000 at 5%
  • £10,000 at zero rate

Total purchases: £27,000
Your total sales are £34,000.

  • (£16,000 / £27,000) x £34,000 / 6 = £3,358.02
  • (
£1,000 / £27,000) x £34,000 / 21 = £59.96

Total VAT for the period = £3,417.98

3. Direct Calculation Scheme

You make a small proportion of sales at one VAT rate and the majority at another rate.
Your total sales are £25,000.

  • Deduct the ESP of zero-rated goods = £2,500.
  • Deduct the ESP of reduced-rate (5% goods) = £105.
  • Sales of goods at the 20% VAT rate = £22,395.
  • Divide by 6 to calculate the VAT due on the 20% goods = £3,732.50.
  • Divide by 21 to calculate the VAT due on the 5% goods = £5.
  • Total VAT due is £3,732.50 + £5 = £3,737.50.

It’s up to you which scheme you join. The calculations you have to do vary for each 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.
These schemes does not apply to Caterer, Pharmacist, and Florist.
Get in touch with us to know which scheme suits you the best for your business.