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HMRC internal manual

VAT Retail schemes guidance

Fundamentals of the retail schemes: Retrospective change of retail schemes: Considering requests for a retrospective change of scheme

There is no entitlement for any retailer to change schemes retrospectively. The previous, almost automatic, approval once granted to small and/or newly-registered businesses was removed. If retailers wish to, they may apply to the NAS, stating the scheme to which they wish to change and giving as much detail as possible as to why they consider they have exceptional grounds for such a retrospective change. The discretion to allow retrospection is delegated and is best used locally where the effects on control and compliance can be given their proper weight.

A list of the questions which should be considered is provided at VRS3470. We may amend or supplement this list over time. A list like this cannot be exhaustive and you should remember the obligation to consider each case on its merits.

Deciding whether to allow retrospection is a judgmental process: there is no template or scoring system which will allow the answers to the questions in VRS3470 to lead directly to a conclusion. In forming a judgement, take account of the following principles:

  • retail schemes are a compromise between accuracy and simplicity
  • retail schemes are a way of estimating tax and it is implicit in their operation that more or less tax will be payable
  • retail schemes are chosen by the business
  • there is an administrative advantage in not having to process applications to allow retrospection
  • there is a compliance advantage in having some certainty in declared liabilities
  • the cost to the applicant must be balanced against the cost to the taxpayer
  • the scheme that the business proposes to use retrospectively must be the same as that to be used prospectively. This means that the retailer must continue to be VAT-registered and to trade
  • one retrospective change of scheme cannot overlap another
  • the business’s records should be sufficient to allow the proposed scheme to be operated correctly

Again, the appropriate HO should first consider cases of difficulty. In cases of doubt, or where there are persistent representations against a local decision, refer the case for further advice with full details and a recommendation, following the instructions on the Indirect Tax Homepage.