Key facts
- Designed for retailers who sell at multiple VAT rates to the public.
- Three schemes available: Point of Sale, Apportionment, Direct Calculation.
- Removes the need to track the VAT rate of every individual sale.
- Most businesses using EPOS systems can use the Point of Sale scheme.
Why Do Retailers Need Special Schemes?
Retailers selling a mix of goods at different VAT rates (e.g. a newsagent selling zero-rated food and standard-rated stationery) would normally need to identify the VAT rate for every sale. Retail schemes provide simpler ways to calculate output VAT.[1]
The Three Retail Schemes
| Scheme | How It Works | Best For |
|---|---|---|
| Point of Sale | Identify the VAT rate at the time of each sale (usually via EPOS) | Businesses with modern tills that record rates per item |
| Apportionment 1 | Use the ratio of purchases at each rate to split your total sales | Businesses where purchase patterns match sales patterns |
| Direct Calculation 1 | Calculate the expected selling price of goods at one rate, and everything else is at the other rate | Businesses where one rate dominates (e.g. mainly zero-rated) |
Point of Sale Scheme
The simplest scheme if your till system records the VAT rate per item. Your EPOS system does the work automatically. Most modern tills support this.
Apportionment Scheme
If you can’t identify the rate at the point of sale:
- Work out your purchases at each VAT rate
- Calculate the ratio of standard-rated to zero-rated purchases
- Apply this ratio to your total daily gross takings to split sales by rate
Which Scheme Can I Use?
| Annual Turnover | Available Schemes |
|---|---|
| Up to £1 million | Point of Sale, Apportionment 1, Direct Calculation 1 |
| £1 million – £130 million | Point of Sale, Apportionment 2, Direct Calculation 2 |
| Over £130 million | Must agree a bespoke method with HMRC |
Tip: If you already have an EPOS system that tracks VAT rates, the Point of Sale scheme is the most accurate and simplest option.
Frequently Asked Questions
What is a VAT Retail Scheme?
A VAT Retail Scheme is a simplified method for retailers selling goods at multiple VAT rates to calculate how much output VAT they owe, without needing to record the VAT rate for every individual sale.
Which VAT Retail Scheme should I use?
If your till system records the VAT rate per item, use the Point of Sale scheme. If not, the Apportionment scheme splits sales using your purchase ratios, while the Direct Calculation scheme works well when one VAT rate dominates your sales.
Can any retailer use a VAT Retail Scheme?
Businesses with turnover up to £1 million can use the basic schemes (Point of Sale, Apportionment 1, Direct Calculation 1). Larger businesses use adapted versions, and those over £130 million must agree a bespoke method with HMRC.
Do I need a Retail Scheme if I sell at one VAT rate?
No. Retail Schemes are only needed if you sell goods at multiple VAT rates (e.g. zero-rated and standard-rated). If all your sales are at one rate, standard VAT accounting is sufficient.
Further Reading
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Sources
- VAT retail schemes — GOV.UK
- Retail schemes (VAT Notice 727) — GOV.UK
- VAT guide (VAT Notice 700) — GOV.UK