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HMRC internal manual

VAT Retail schemes guidance

Bespoke schemes: practical guidance: Retrospective variation of a scheme

Retrospective variation of schemes may be allowed only in the exceptional circumstances described at VRS3450. This applies equally to cases where VAT is understated and to those where VAT is overstated.

In principle, the policy on retrospection is the same for bespoke schemes as it is for standard schemes.

Agreeing retrospection too easily in a large business context may undermine the strong and successful policy of allowing retrospection only exceptionally, and may create difficulties for colleagues dealing with other businesses. For this reason, retrospective changes should be very rare. However, changes may be retrospective:

  • by agreement;
  • where an agreed scheme is based on a misrepresentation that has a material impact; or
  • where a fundamental flaw becomes apparent after agreement of the scheme.

Past advice from the Solicitor, and the reasoning of the Tribunal in the Tesco case(Lon/93/1954A), emphasise that the circumstances outlined at the second and third bullets will occur only rarely. If you think they are present in a particular case, you should consult the Retail UoE.

In most cases, the bespoke agreement will be a perfectly legitimate method of calculating how much the business should pay to HMRC, and not a means of identifying the liabilities of individual supplies. In these circumstances the request for retrospective variation would be refused.

However, if a particular bespoke agreement appears to change VAT law, we would agree retrospective variation in line with VRS3480.