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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Value Added Tax: special schemes for retailers

Under the ordinary scheme described at BIM31570, the trader who accounts for the VAT is required to calculate and record the VAT applicable on the goods and services they supply on every supply that takes place. Further, they must be prepared to supply a ’tax invoice’ to the customer so that the VAT charged can be included in the customer’s own input tax if the customer is a taxable person. However, if the trader supplies his goods or services to the general public, for example if the trader is a retailer, it would be impracticable for them to record the VAT applicable to each separate sale and it is only exceptionally that the VAT on the sale will be ’input tax’ of the customer. Accordingly, special schemes are available for retailers (and other traders who normally supply goods or services direct to the public without tax invoices) under which the VAT is calculated by reference to aggregate takings. There are a number of different methods available for calculating this. In such schemes the credit to profit and loss should be the gross sales less the VAT attributable to them as calculated under the appropriate scheme adopted by the retailer. The problem then arises of apportioning the VAT where a ’tax period’ overlaps the beginning or ending of the accounting period. This problem is primarily an accountancy problem and, except in relation to large retail businesses, HMRC officers are not normally required to enquire into the accountancy treatment.

The special schemes for retailers do not affect the calculation of the input tax. This must be arrived at in the normal way.