VAT Tax Points and Retail Schemes

A VAT tax point is a date when a VAT-registered business must account for VAT on the goods or services it supplies. Generally, the tax point occurs when goods are delivered or services are performed. However, it can also be the date when a business receives payment or issues an invoice, depending on the specific circumstances. VAT tax points help determine the correct VAT period in which sales and purchases should be reported on a VAT return.

Retail schemes are special VAT accounting methods designed for retailers who face challenges in identifying and recording the VAT due on each individual sale. Retail schemes simplify the process by allowing businesses to account for VAT on their total daily gross takings rather than calculating VAT on every single transaction.

There are several retail schemes available, including:

1. The Point of Sale Scheme
2. The Apportionment scheme
3. The Direct Calculation scheme
4. The Margin Scheme

 When calculating daily gross takings for a retail scheme, a business must generally include:

1. All sales of goods and services made at the standard, reduced, or zero VAT rates.
2. Sales made outside the scope of UK VAT, such as exports or EC supplies.
3. Sales made under a different VAT retail scheme or a margin scheme.
4. Any tips or gratuities received that are passed on to staff.

Items not included in daily gross takings are:

1. Cash is received for staff purchases if they are recorded separately and the VAT due is accounted for correctly.
2. VAT refunds are made to customers.
3. Cash received for returned goods if the sale has already been accounted for in gross takings.
4. Money is received for services provided by a third party, such as selling lottery tickets or phone top-ups, if the retailer is acting as an agent and is not responsible for accounting for the VAT on these transactions.

HMRC guidance on retail schemes, specifically VAT Notice 727, provides detailed information on calculating daily gross takings, what to include and exclude, and the various retail schemes available. It is essential to consult the most up-to-date guidance and seek professional advice if needed, as rules and regulations can change over time. You can call us to discuss your VAT compliance with our specialist tax advisors.