VRS3480 - Fundamentals of the retail schemes: Retrospective change of retail schemes: Retrospective change of scheme allowed

You must give any such approval in writing and you must always remind the business to make the necessary adjustments on ceasing to use the current scheme.

Where we allow a retrospective change of scheme, the difference between the output tax declared under the original scheme and that falling due under the new scheme (assuming that the output tax under the original scheme exceeds that under the new scheme) becomes an amount paid by way of VAT that was not due to the Commissioners. As such, the difference is liable to be repaid under section 80(1) of the VAT Act 1994, subject to:

  1. a claim being made for that purpose (section 80(2));
  2. any defence the Commissioners may have on the grounds of unjust enrichment of the taxable person if his claim is met (such a defence must be specifically pleaded by the Commissioners and it may be prudent to seek the advice of Tax Administrative Advice, which advises on unjust enrichment); and
  3. the relevant time limits.

The method of claiming such an overpayment is prescribed by Regulation 37 of the VAT Regulations 1995 [SI 1995/2518]: the claim must be made in writing to the Commissioners and must, by reference to such documentary evidence as is in the possession of the claimant, state the amount of the claim and the method by which that amount was calculated.

Interest under section 78 of the VAT Act 1994 will not normally be payable where a retailer changes schemes retrospectively.