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HMRC internal manual

VAT Retail schemes guidance

Fundamentals of the retail schemes: Issue of best judgement assessments to businesses operating retail schemes

The Tribunal case Ian Briggs [LON/94/1778A] highlighted the fact that an officer issuing an assessment to a business operating a retail scheme incorrectly must attempt to do so on the basis of that scheme unless this would produce a figure that is not fair and reasonable.

In this case, the appellant was a newsagent using the former scheme B2, which required the retailer to establish his zero-rated purchases of goods for retail sale and apply a fixed mark-up to establish a figure for zero-rated sales. That figure was then subtracted from the daily gross takings to arrive at a figure for standard-rated sales. A visiting officer considered that Mr Briggs’ DGT figure was understated and carried out a mark-up exercise for the standard-rated goods sold in the shop.

The VAT fraction was then applied to establish the output tax due. This effectively disregarded the method being used under scheme B2. In the tribunal’s view, if, having considered the effect of the scheme, the officer had concluded that it would result in a figure which was not fair and reasonable, this may have entitled the officer to disregard the scheme when making the assessment. There was no evidence that this had been done and so the appeal was successful.

Therefore, where you are unable to assess on the basis of the scheme used, or if that scheme does not produce a fair and reasonable result, you may assess using best judgement.