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HMRC internal manual

VAT Retail schemes guidance

HM Revenue & Customs
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Bespoke schemes: practical guidance: Standard paragraphs

The Solicitor’s Office has produced draft preamble and endorsement clauses for incorporation in bespoke scheme agreements, which are reproduced below.


This agreement is made pursuant to regulation 67 of the Value Added Tax Regulations 1995 and Notice 727 VAT Retail Schemes, which requires businesses with a VAT exclusive retail turnover exceeding £130 million either to account for VAT normally, or enter into a bespoke agreement in relation to retail supplies.

This agreement is to value positive VAT rated supplies. Nothing in this agreement overrides any other obligation under the law.


This agreement is made on the basis that (to the best of your knowledge) there has been a full disclosure in the context of your current business structure (and the VAT group membership - if appropriate) and trading patterns. Should there be any changes in the structure of your business or any changes in trading patterns, you should inform the Commissioners in writing immediately. This is so that the Commissioners may review the scheme in the light of those changes and decide whether the changes are such that the continued use of that scheme no longer produces a fair and reasonable result. Should the Commissioners become aware that any such changes have not been notified to them, they may withdraw their agreement and refuse use of this scheme for the reasons provided for in the Value Added Tax Regulations 1995, regulation 68.

This agreement takes effect from …[date]… , will be subject to periodic review and will cease on …[date]. The first review will take place on …[date]… Subject to HMRC’s satisfaction that no such changes as those outlined in the above paragraph have taken place, approval for continued use of this method of valuing retail supplies will be considered and a further review date set.

I agree to operate the scheme set out in this agreement as a method of valuing retail supplies for the VAT registration [VRN].

Signed ………………………… [Officer HMRC, name and grade]

Signed ………………… [Officer of the company, name and status]

Departmental signatory

The decision about who should be the signatory for HMRC is a local one. In most cases, the officer with the most detailed knowledge of the business’s accounting systems will be the best signatory. In more complex schemes, or in cases where significant revenue flows through the scheme, it’s important to ensure that either a peer, or a senior manager, reviews the contents of the scheme as well.

Must the standard paragraphs be used?

Where negotiations have not run smoothly, it’s possible that use of these clauses could reduce the likelihood of an agreement being signed. If you feel happier with something based on a more informal approach, you should feel free to negotiate the agreement accordingly. In any event, the agreement must:

  • set out clearly the way in which the scheme will operate; and
  • include a reference to the legal basis of the scheme.

We recommend that any agreement letter should be reviewed by a second officer before it is finalised, thus reducing the risk of ambiguities. Should a second officer not be available, the Retail UoE can be consulted.