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VAT retail schemes let you calculate the VAT you owe from your total takings rather than tracking VAT on each transaction. Choosing the right scheme can cut your paperwork while keeping your figures accurate.

How retail schemes work

Retail schemes calculate your output VAT from your daily gross takings (DGT). The method depends on your systems, turnover, and product mix.

VAT retail schemes are simplified methods for calculating VAT when it is impractical to issue a VAT invoice for every sale. They are designed for retailers who sell mainly to non-VAT registered customers (the general public) who cannot reclaim VAT.

Without a retail scheme, you would need to record the VAT on each individual sale. Retail schemes allow you to calculate your VAT liability from your total takings (daily gross takings or DGT).

Eligibility: Businesses making retail sales to non-VAT registered customers
Purpose: Calculate VAT output from total takings when individual invoicing is impractical
Standard schemes available: Point of Sale, Apportionment (1 and 2), Direct Calculation (1 and 2)
Bespoke schemes: Required if turnover exceeds £130 million (excluding VAT)
Flat Rate Scheme users: Cannot use retail schemes

When to use a retail scheme

Use a retail scheme if you:

Make sales direct to the public
Cannot account for VAT on each sale in the normal way
Sell goods at different VAT rates (standard, reduced, zero-rated)

You can only use a retail scheme for retail sales. Account for non-retail sales, such as sales to other VAT-registered businesses, in the normal way. You must give a VAT invoice if a customer asks for one.

Choosing the right scheme

Your choice depends on your turnover, systems capability (do you have EPOS?), and whether your mark-ups vary between product categories.

Choosing the right VAT retail scheme depends on your turnover, the systems you have, and how your product mix varies by VAT rate. The table below summarises when each scheme is most appropriate.

Point of Sale: You can identify the VAT rate at each sale; turnover up to £130m
Apportionment 1: Turnover up to £1m; similar mark-ups across VAT rates
Apportionment 2: Turnover up to £130m; mark-ups vary between VAT rates
Direct Calculation 1: Turnover up to £1m; most sales at one VAT rate
Direct Calculation 2: Turnover up to £130m; most sales at one rate, minority not identifiable at sale

What decides the choice

Apportionment 1 and Direct Calculation 1 are limited to retail turnover of £1 million or less. Point of Sale needs a till system that can identify the VAT rate at each sale. If your mark-ups vary between VAT rates, the schemes based on expected selling prices (Apportionment 2 and Direct Calculation 2) are more accurate. If most of your sales are at one VAT rate, a Direct Calculation scheme is usually simpler. Consider which records you already keep. Above £130 million, none of the standard schemes is available.

If you change scheme, you must complete any annual adjustment for the old scheme, start the new scheme at the beginning of a VAT period and meet its conditions.

Use a VAT retail scheme

Point of Sale, Apportionment and Direct Calculation schemes: eligibility, calculations, records and how to choose

Choose and use a VAT retail scheme

Use a VAT retail scheme