Vat Schemes

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VAT retail schemes

You can use one of the 3 VAT retail schemes if you are a retail business and sell a significant amount of low value or small quantity items to the public with different VAT liabilities.

• Point of Sale Scheme - you identify and record the VAT at the time of sale
• Apportionment Scheme - you buy goods for resale
• Direct Calculation Scheme - you make a small proportion of sales at one VAT rate and the majority at another rate

https://www.gov.uk/vat-retail-schemes - More information here.

The schemes allow you to calculate the VAT once with each VAT return rather than calculating it for each sale you make.

You cannot use the retail schemes if you use the Flat Rate Scheme or a margin scheme.

VAT margin schemes

A VAT margin scheme lets you calculate VAT on the value you add to the goods you sell rather than on the full selling price of each item.

The VAT margin scheme reduces the VAT you pay if you are selling:

• second-hand goods
• works of art
• antiques
• collectors’ items

You can only use the scheme if you were not able to claim back any VAT when you bought the goods.

VAT Annual Accounting Scheme

You can use the VAT Annual Accounting Scheme if your annual VAT taxable turnover is £1.35 million or less.

It lets you complete one VAT return each year instead of 4 (one every 3 months).

You pay instalments of the VAT that you expect to owe, so that you do not get a large VAT bill at the end of the year.

You can also make extra payments towards your end of year VAT bill.

VAT Cash Accounting Scheme

You can use the VAT Cash Accounting Scheme if your annual VAT taxable turnover is £1.35 million or less.

It means you pay VAT to HMRC when your customer pays you rather than when you invoice them.

You can only reclaim VAT on your purchases after you have paid your supplier.

VAT Flat Rate Scheme

The VAT Flat Rate Scheme lets you work out what you owe HMRC in VAT as a percentage of your gross turnover.

You can only use this scheme if you are a small business with an annual taxable turnover of £150,000 or less excluding VAT.

The amount of VAT you pay depends on your industry and type of business.

https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay - Flat rate % here.  

If you join this scheme, you:

• do not have to keep detailed records of sales and invoices
• pay a fixed-rate percentage that is lower than the standard rate
• cannot reclaim the VAT on your purchases (except for certain capital assets over £2,000)

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