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HMRC internal manual

VAT Retail schemes guidance

Eligibility and refusal to allow use of a retail scheme: Who is eligible to use a retail scheme?

Retailers who:

  • cannot reasonably be expected to account normally and
  • whose annual taxable turnover in retail sales does not exceed £130 million

can generally choose from a range of standard public schemes.

There are lower turnover limits for the simplest schemes (other than point of sale).

If a retailer who has an annual taxable retail turnover exceeding £130 million wants to use a retail scheme, they must formally agree a bespoke scheme with HMRC.

Retailers who are able to account normally and who choose to do so must adhere to the rules on rounding outlined in Notice 700 The VAT Guide and VAT Trader’s Records Manual.

The turnover limits for retail schemes apply to the taxable retail turnover of the VAT registration as a whole. This means that a VAT group comprising 10 companies or a single retailer with 10 shops, each with an annual taxable retail turnover below £130 million, but with a combined turnover greater than £130 million, must agree a bespoke scheme if they wish to use a retail scheme.

We considered defining the way the turnover is calculated for these purposes by means of a rule in a notice. In most contexts, however, there will be little difference between various methods and we feel that a formal rule would complicate the notice unnecessarily for the majority of businesses. However, if a business or adviser requests clarification about the clarification of turnover, you should advise them of the guidance in the following paragraphs.

  • New businesses, or those that have not previously used a retail scheme, should apply a forward look turnover test when deciding whether they are eligible to use a scheme. This means that if a business has reasonable grounds for believing that its annual turnover of retail supplies will not exceed the limit for a particular scheme, it may use that scheme.
  • Businesses that already use a scheme must apply a backward look turnover test to the taxable retail supplies it made in the previous 12 months. Provided that it exceeded the turnover limit for its chosen scheme it will remain eligible to use it.