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HMRC internal manual

VAT Retail schemes guidance

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HM Revenue & Customs
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Introduction: The law governing retail schemes

EU Law

Retail schemes are permitted under Article 395 of Council Directive 2006/112 (the Principal VAT Directive), which allows EU member states to introduce special measures that simplify procedures for charging VAT, provided that, except to a negligible extent, they do not affect the amount of tax due at the final consumption stage.

As a simplification procedure, retail schemes cannot override the basic VAT rules on supply, consideration and liability.

UK Law

The primary legislation is contained in the VAT Act 1994, Schedule 11, paragraph 2(6), which give the Commissioners the power to make regulations to devise retail schemes:

2(6) Regulations under this paragraph may make special provision for such taxable supplies by retailers of any goods or of any description of goods or of services or any description of services as may be determined by or under the regulations.

Those regulations are contained in Part IX - Supplies by Retailers of the Value Added Tax Regulations 1995 [SI 1995/2518], Regulations 66-75.

Regulation Subject See section
     
66 Interpretation  
67(1) Scope of provision and publication of terms Below
67(2) Power to vary terms of schemes Below
68 Power to refuse use of a scheme VRS2350
69 Use of more than one scheme VRS3300
71 Period of use of scheme, changing schemes VRS3350
72 Ceasing to use a scheme VRS3450
75 Change of tax rate or liability  

Regulation 67 requires the Commissioners to publish the working methods for the retail schemes. Under this regulation, the notices referred to in VRS1050 have the force of law.

67(1) The Commissioners may permit the value which is to be taken as the value, in any prescribed accounting period or part thereof, of supplies by a retailer which are taxable at other than the zero rate to be determined by a method agreed with that retailer or by any method described in a notice published by the Commissioners for that purpose; and they may publish any notice accordingly.

67(2) The Commissioners may vary the terms of any method by-

(a) publishing a fresh notice,

(b) publishing a notice which amends an existing notice, or

(c) adapting any method by agreement with any retailer.

Throughout this guidance, ‘the Directive’ refers to the Principal VAT Directive, ‘the Act’ refers to the VAT Act 1994 and the Regulations refer to the VAT Regulations 1995 [SI 1995/2518].