VAT Retail Schemes

What is VAT Retail Schemes and how it Works

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What is VAT retail schemes and how it works

 

VAT calculation

Before registering for a VAT retail schemes, you need to know VAT calculation. It is highly advise that a business seeks the help of a professional accountant. VAT can an incredibly different area. Especially when considering a high sales volume to the general public.

A skill accountant can advise you on which scheme is right for your business. Whether the scheme will beneficial and assist in your accounts. Accountants will ensure you correct calculation. It is always paying the right amount of VAT to the HMRC.

VAT retail schemes are a special set of schemes use by retail businesses to account for VAT registration.  The schemes are use for sales a significant amount of low value and/or small quantity items to the public with different VAT liabilities.

The use of the schemes can save businesses a significant amount of time in calculating the amount of VAT due to HMRC VAT. In many circumstances, it is extremely difficult for these businesses to VAT account, to using standard VAT accounting. Retail scheme VAT can 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.

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 (businesses with an exclusive turnover under £1m or between £1m and £130m.)
  • Direct Calculation Scheme – you make a small proportion of sales at one VAT rate and the majority at another rate (businesses with an exclusive turnover under £1m or between £1m and £130m.)

If your turnover excluding VAT is over £130 million you must agree a bespoke retail scheme with HM Revenue and Customs (HMRC).

The decision as to which retail scheme is to use. It is usually driven by a combination of looking at the scheme. That provides the best result for the business in question combined with the cost of using the scheme. With the important caveat that HMRC consider that the chosen scheme is fair and reasonable.