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HMRC internal manual

VAT Retail schemes guidance

Bespoke retail schemes: general principles: What scheme methodologies are acceptable?

In principle, any methodology which does not breach the tests in regulation 69 of the VAT Regulations 1995 (see VRS3355) is acceptable. It is anticipated that a bespoke scheme will be based on one, or a mixture, of the methodologies in the published notices: apportionment, direct calculation or point of sale. However, in most cases, point of sale is likely to provide the simplest and most accurate methodology. Advances in scanning and till technology create an assumption that point of sale will form the basis of a bespoke scheme, even if the VAT on a proportion of transactions has to be calculated using another method.

If a proposal is made (or reviewed) which depends on apportionment or direct calculation, you need to consider whether the test of a fair and reasonable result, or the test of revenue protection, provides a basis to disagree the proposal. In order to make such a decision, you will need to have reasonable evidence of the revenue impact and the ability of the business to use a point of sale method.

As with any retail scheme, HMRC may refuse to permit use of a bespoke scheme if it does not produce a result which is fair and reasonable (Regulation 68(a) of the VAT Regulations 1995 [SI 1995/2518]). For more information on the power to refuse use in this scenario, see VRS2350 and paragraphs 2.5-2.6 of Notice 727/2 Bespoke retail schemes.