Fundamentals of the retail schemes: Mixtures of schemes: Possible manipulations involving mixtures
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
If a retailer seeks approval for a mixture of schemes, you should consider carefully whether there really is a need for such a proposed mix. In recent years various computer models (commonly known as VAT optimisation models) have been developed in order to minimise the tax due under the retail schemes. The models are developed for individual retailers and the business is split down into department groupings, using historical data to work out which scheme would produce the best results for that department. Such departments usually combine unlikely mixtures of goods, such as petrol and milk, and are for VAT accounting purposes only. The number of combinations of schemes possible depends on the number of stores and groupings. For example, in a small business with just seven stores the possible combinations exceed 300 million while for a supermarket chain with 800 stores there could be over 100 billion different combinations of schemes!
Our policy is that the artificiality of splitting the goods sold into various unconnected groupings purely for the purpose of the retail scheme is not acceptable. It is also unlikely that assurance staff could check such a system easily. This stance has dissuaded some larger retailers from seeking to use such models.