This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

VAT Retail schemes guidance

Special arrangements for certain professions or trades: Chemists

The supply of goods dispensed by a registered chemist on the prescription of a medical practitioner is zero-rated, but the majority of such goods are standard-rated when purchased. Some goods dispensed on prescription are, however, also zero-rated when purchased. Further guidance can be found in VATHLT

As with caterers above, this change in liability causes problems for those retail chemists who are unable to use normal accounting or a point of sale retail scheme: provision needs to be made for some sort of adjustment.

Prescription charges are treated as part of retail turnover for the purposes of establishing eligibility for particular standard or bespoke retail schemes.

The Commissioners, using the general power under regulation 67 of the VAT Regulations 1995to publish schemes, have provided for the adjustment method in Notice 727 Retail schemes. There are two adjustment methods, depending on whether the retail chemist is using the first apportionment scheme or a direct calculation scheme (which, we understand, is used by the majority of retail chemists who are unable to use a point of sale scheme); but both require an estimation of those goods which are zero-rated when purchased by the chemist and are still zero-rated when supplied.

In either method, the adjustment requires the chemist to carry out a new estimate for each period to give a new calculation. This means that the new owner of a retail chemist business cannot merely use the proportion established by a previous owner.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)