Mechanics of the standard retail schemes: Definition of daily gross takings (DGT)
Daily gross takings are a key element of retail schemes. Most standard schemes apply the VAT fraction to a portion of the DGT to arrive at the retailer’s output tax liability. But the term can be misleading: for retail scheme purposes DGT is not simply a record of payments received or cash on hand on any particular day. It is a record of supplies made that day.
The record of DGT can be a listing made from copies of sales vouchers but will normally be a till roll. We do not have the power to require a retailer to purchase a till or indeed even to use a till roll. But, if a till roll is used, the records produced must be retained. The V1-37 Control notes on cash registers. give advice on access to electronic tills where a paper record has not been retained/produced.
The record of DGT does not have to be kept in any particular way but it must include, for each retail scheme used:
- all payments as they are received by the retailer, or on their behalf, from cash customers for retail supplies;
- the value, including VAT, of all credit or other non-cash retail sales at the time the supply is made; and
- details of any adjustments made to this record.
Where a retailer charges a higher amount than, for example, the ticket price of an item for accepting payment in one form or another (cash, cheque, credit card, etc), this premium is additional consideration for the item supplied. The ticket price is merely the price at which the retailer offers to sell: the full consideration charged must be included in the DGT. There is an exception to this general rule where an additional charge is made by an agent acting for the supplier of goods.
Payments as they are received
In recent years, assurance techniques such as invigilation have been based on the view that the requirement in the first bullet point at section 4.4 of Notice 727 Retail schemes means that there is a need to record each and every payment at the time it is received. The only precedent is the Courage [Lon/92/3197] case. The Chairman said:
In our judgement the plain meaning of the words “you must record all payments as they are received” is that each individual payment must be recorded at the time when it is received. A notice such as 727 while taking effect under a statutory provision is not to be construed as if it were a statute. While the notice could be clearer… [the appellant’s] interpretation that “as they are received” does not necessarily mean at the time of receipt but also means at the end of the day’s trading seems to us to strain the language unduly.
The requirement in the current version of the retail scheme notices is unchanged in this respect since the time of the Courage tribunal. Any business that challenges this requirement should be referred to the Courage tribunal. Cases of doubt or difficulty should be referred to VATAPPS Accounting Policy, using the instructions found on the Indirect Tax Homepage.