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If you sell goods you must calculate how much VAT to record in your VAT account.

For goods sold inclusive of VAT, you must deduct the VAT you have to record. For goods sold exclusive of VAT, you must add it.

VAT retail schemes can make calculating your VAT simpler. Instead of calculating the VAT for each sale you make, you do it once with each VAT return.

There are 3 standard VAT retail schemes:

• 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

If your turnover excluding VAT is over 拢130 million you must agree a bespoke retail scheme with HM Revenue and Customs (HMRC).

You can use a retail scheme together with the Cash Accounting Scheme and the Annual Accounting Scheme.

You can鈥檛 use retail schemes with the Flat Rate Scheme.

Joining and using a scheme

You can join a retail scheme at the beginning of any VAT period. You don鈥檛 need to tell HMRC.

It鈥檚 up to you which scheme you join. The calculations you have to do vary for each scheme.

You must provide an individual VAT invoice if a customer asks for one.

Changing and leaving a scheme

You can leave a scheme at the end of any VAT period. If your turnover rises above 拢130 million you鈥檒l have to leave the scheme immediately.

You can change to another scheme after 1 year of joining a scheme.

Caterers, pharmacists and florists

There are separate rules if you鈥檙e a:

• caterer
• pharmacist
• florist

Who can use it

You can use this scheme if you can identify the VAT rate for goods sold at the time of sale, eg you have an electronic till that does this for you.

How to calculate your VAT

1. Add up all the sales for each VAT rate for the VAT return period.

2. For 20% rated goods, divide the sales by 6. For 5% rated goods, divide the sales by 21.

Who can use it

You can only use this scheme if you buy goods for resale.

You can鈥檛 use apportionment if you provide:

• services
• goods that you鈥檝e made or grown yourself
• catering services

Your turnover, excluding VAT, can鈥檛 be more than 拢1 million a year.

There is a separate scheme for businesses with a turnover of between 拢1 and 拢130 million.

How to calculate your VAT

1. Calculate the total value of goods purchased for resale in the VAT period for each VAT rate.

2. Divide the total of purchases for each VAT rate by the total for all purchases.

3. Multiply the outcome by your total sales, divided by 6 for 20% rated goods, and divided by 21 for 5% rated goods.

Who can use it

You might want to use this scheme if you make a small proportion of sales at one VAT rate and the majority at another rate.

Your turnover, excluding VAT, can鈥檛 be more than 拢1 million a year.

There鈥檚 a separate scheme for businesses with a turnover of between 拢1 million and 拢130 million.

How to calculate your VAT

1. Calculate the expected selling prices (ESPs) for your minority or majority goods. Use the one that鈥檚 easier.

2. Total up the ESP for the VAT period.

3. If your goods are standard rated at 20% divide the total ESP by 6. If they鈥檙e zero rated, deduct the total ESP from your total sales. This will give you your sales at 20%. Then divide by 6.

4. If you have reduced-rate (5%) goods deduct the ESP of this from your sales before calculating your VAT at 20%. Then calculate the VAT due on reduced-rate goods by dividing the ESP of these by 21. Add this figure to your 20% VAT to get total VAT due.

You must make an annual stock adjustment if your annual turnover is between 拢1 million and 拢130 million.