Retail Scheme – Point of sale
This scheme applies to those businesses who use a till or some accurate means of recording their sales, split into the various rates of VAT. Some businesses may only have a limited amount or no non-standard outputs so this is a very easy scheme for them. They must, however, be able to supply an invoice if requested, showing the VAT. All other aspects of this scheme are identical to the Standard Invoicing and Cash Accounting schemes. Some retailers may have some credit customers and may benefit from cash accounting within the retail scheme.
Retail Scheme – Apportionment schemes
The basis of the apportionment scheme is to allow businesses that cannot accurately analyse their sales by the various VAT codes, and who purchase goods for resale, to use their purchases to estimate the VAT on their sales.
There are two schemes:
Apportionment Scheme 1
Based on costs of goods purchased the VAT calculated in Box 1 will almost certainly be incorrect. The adjustment in Column 2 will be –
Calculate total purchases = Inputs for VC 0 + Inputs for VC 1 + Inputs for VC 5 = ‘TP’ and Total Sales for the same VAT codes = ‘TS’
B1 = ((VC1 inputs/’TP’ *’TS’)/6) + ((VC5 inputs/’TP’ *’TS’)/21) – A1
This only works if the purchases all relate to cost of sales. For other purchases use VAT code 1 – Standard and 0 for 0 rated purchases. The adjustments to deal with this will be:
VAT Code 1 VAT + VAT Code 5 will show in Box B4
Depending on the result – if negative, journal will be Dr. VAT Control account and Cr. Sales. If positive, journal will be Dr. Sales and Cr. VAT Control account. There is no adjustment for stock but at the year end a calculation of the year to date must made and an adjustment to the last quarter’s figures will be necessary.
Apportionment Scheme – 2
In this scheme it will be necessary to use the product analysis to detail all purchases – Cost and Expected Sales Price.
The scheme works on a rolling 12 months basis for the purchases calculation and rather than keep the inputs and outputs open for the twelve months transfer the totals for each quarter to another small table.
The calculations are as follows –
All purchases for the year at the various VAT rates uplifted to the Expected Selling Price and the VAT % calculated and used to calculate the output tax on actual sales
The adjustment in column 2 is –
B1 = A6 *calculated % -A1
Retail Scheme – Direct calculation schemes
Direct Calculation Scheme – 1
This scheme requires stock to have Expected Selling Prices and is based on the purchases in the quarter. The VAT is calculated by determining whether the zero –rated purchases or the standard rated purchases are the lower. The Estimated Sales Value of the lower rate is used to calculate the VAT due.
Zero rated purchases in qtr = 70,000
Std rated purchases in qtr = 85,000
ESP of Zero-rated purchases = 260,000
Total sales incl VAT = 650,000
Deduct Zero rated purchases = 390,000 VAT due = 1/6th = 65,000
The adjustment in column 2 will be –
B1 = 65,000 – A1
All other figures in column 2 will be based on B1 with no amendments to purchases and the corresponding adjustment made to B6
Depending on the result – if negative, journal will be – Dr. VAT Control account and Cr. Sales. If positive, journal will be
Dr. Sales and Cr. VAT Control account
Direct Calculation Scheme – 2
This scheme operates in the same way as Direct Calculation scheme 1 but with an annual stock adjustment.
These schemes are not covered in Prelude Desktop or Cloud but can be if the need arises.