HMRC internal manual

VAT Retail schemes guidance

Mechanics of the standard retail schemes: DGT and newsagents/small retailers

Difficulties encountered

In principle, the DGT requirements outlined above apply to all businesses but we recognise that this may cause administrative difficulties for milkmen/newsagents who make doorstep deliveries of largely zero-rated goods, and small retailers such as corner shops who may provide goods on tick.

In 1996 we withdrew the standard method of gross takings (SMGT), which allowed retailers to account for VAT on credit sales when they received payment. We initially rejected representations that small businesses should be allowed a general concession to bring credit sales to account at the end of the VAT period.

However, from Spring 2001, provided taxable retail turnover is less than £1 million, retailers can take account of opening and closing debtor balances for a tax period in their scheme calculations. Together with the takings in respect of counter sales made and credit sales paid in the period, this should provide the value of the daily gross takings for the scheme calculation.

For example:

First period of using a retail scheme

Takings for the period £30,000
Closing debtors (£ 1,500)
Gross Takings for retail scheme purposes £28,500

Next period

Opening debtors +£ 1,500
Takings for the period £31,000
Closing debtors (£ 1,600)
Gross takings for retail scheme purposes £30,900