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HMRC internal manual

VAT Retail schemes guidance

HM Revenue & Customs
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Mail order traders: Traders using retail schemes

As with any other retailer, mail order traders may use a retail scheme if they cannot account for tax in the normal way. If a retail scheme is used then, again, the preferred choice is a point of sale scheme, with the liability of sales being determined as they are supplied (see Time of supply below.)

If use of this scheme is not practical, a modified apportionment scheme using the expected selling prices of goods despatched to customers less the expected selling prices of goods returned from customers is likely to produce a fair and reasonable valuation of taxable supplies made. This is known as net despatches. A distortive effect may however be caused by goods lost in transit: these are goods despatched but accepted as not having been received by the agent. In some systems, both the initial despatch as well as the issue of the replacement goods for the same supply will be included in the despatches figures used in the scheme calculation, leading to an element of duplication. This is unlikely to produce a fair and reasonable valuation of the supplies actually made: in such cases, an adjustment to the value of net despatches will be required for losses in transit. Details of how such an adjustment is to be made must be incorporated within the retail scheme agreement.

Some goods returned by the agent may also be lost in transit: therefore a further adjustment is required within the retail scheme to adjust for returns not received and processed.

Officers are invited to discuss any non-point of sale proposals with the Retail UoE.