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HMRC internal manual

VAT Retail schemes guidance

Fundamentals of the retail schemes: Bespoke retail schemes

Retailers have always been able to agree or adapt a method with HMRC (under Regulation 67(1) and (2) of the VAT Regulations 1995 [SI 1995/2518]). Such agreements have largely developed as a result of particular difficulties/complexities within individual retailers’ businesses/systems and may not have been formally recorded. This has led to misunderstandings and has given neither party the necessary certainty as to how the scheme operates.

If they wish to use a retail scheme, retailers with an annual tax exclusive retail turnover above £130 million are required to agree a bespoke scheme with HMRC. This is provided for within the tertiary legislation:Notice 727 Retail schemes refers and Notice 727/2 Bespoke retail schemes provides more information on this.

The policy objective behind bespoke schemes is to secure a fair and reasonable calculation of output tax liability in respect of retail sales, having regard to the need to protect the revenue. Essentially, a bespoke scheme is a tailor-made agreement reached between a retailer and HMRC: it will often be based on one of the standard retail schemes.

VRS7000 provides further information on bespoke schemes.