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HMRC internal manual

VAT Retail schemes guidance

Point of sale (POS) schemes: General

This section of the guidance is not a definitive guide to POS systems, but it may be useful when considering such systems for VAT accounting. If you need information on any particular EPOS and back-office packages and/or assistance with auditing such a system, you should contact computer audit.

Retailers making supplies at the standard or lower-rate only must operate the point of sale scheme, albeit as a bespoke scheme, by simply applying the relevant VAT fraction to their daily gross takings figure.

Retailers making supplies at more than one rate of VAT (standard rate, lower rate, and/or zero rate) need to be able to separate their takings at each rate of tax at the time of each supply. In the past (and perhaps even now at smaller retail outlets) this was done by means of coloured labels or different till buttons, and was often subject to error when processing sales through the till. Nowadays, this is more usually done (particularly at large retailers) by use of electronic point of sale equipment (EPOS) incorporating bar-code readers. Officers should view with caution any point of sale scheme proposed by a retailer that does not use EPOS, especially where the business is a large supermarket where there may be numerous different lines sold in the course of a single transaction.

When worked correctly, a point of sale scheme can provide the most accurate retail scheme valuation; and EPOS systems are generally accurate, provided that the correct VAT rate or code is applied to the bar code of the relevant item. An EPOS system may be designed either:

  • to calculate the VAT on each item and aggregate these amounts (the “normal method” of accounting), or
  • to aggregate separately the values of goods at each rate, for subsequent application of the VAT fraction to each total (a point of sale retail scheme).
  • But EPOS systems do not necessarily scan the entire product range of a retailer; and the aspects covered in the checklist at section 6 of Notice 727/2 Bespoke retail schemes should be considered when negotiating a bespoke point of sale scheme. A scheme that produces a fair and reasonable result is more likely to develop out of proposals if this is done.

The other pages of VRS12000 provide some further information/points to consider on EPOS systems.