What are the VAT considerations for the retail sector?
Retail covers such a wide range of goods and services that inevitably most of the complexities within VAT legislation will pop up somewhere along the line.
Before we get into the nitty gritty of the various retail schemes that are available, there is the simple question of whether a retail business must or should register for VAT.
Does the business make mostly zero-rated supplies which means that it does not have to be registered but must notify HMRC to request exception from registration? Should that business register voluntarily to benefit from VAT recovery and if so which of the retail schemes will give the most fair and accurate VAT recovery?
Then there is the acquisition of an existing business and the transfer of a going concern rules to consider which, if they apply, include the previous owner’s turnover for VAT threshold purposes.
For small retail business, the Flat Rate Scheme can be helpful as it removes the requirement to document every purchase invoice, instead applying a flat rate to income to calculate the notional VAT payable but the limit is quite low at £150,000 (as at January 2025).
Nowadays, few retailers operate on the conventional high street alone and so the considerations of online selling and retail exports also apply.
The prevalence of historic VAT avoidance within the retail sector has resulted in specific anti avoidance legislation at Regulation 4 of Statutory Instrument 2017/1216 which applies where the hallmarks of value shifting exist and must therefore be tested.
What are the potential benefits of discussing VAT?
As with all business sectors, knowledge is king and being aware of and on top of the VAT issues within your sector will both protect your business and give you peace of mind.
Whether you are introducing a new product line and are not sure if it meets the requirements of zero rating, you are upgrading your point of sale systems and need to check that they interface with your accounting system correctly or you have a VAT enquiry ongoing or pending, we can help you and support you.
These are just a few examples of the reasons for engaging a VAT specialist but you can rest assured that we can help you to meet your compliance obligations, paying or claiming the right tax at the right time, whilst recognising legitimate opportunities to mitigate VAT exposure.
What types of retail businesses may benefit from discussing VAT?
Without over simplifying things. all types of retail business can benefit from discussing VAT with a specialist.
Whether you think you may have a problem, are looking for system improvements or just want peace of mind that you are getting it right we can help.
What is our experience of working with the retail sector?
Coming from a background of working as a VAT inspector and latterly as a fraud investigator for Customs & Excise, I have extensive experience of the retail sector.
I have worked with retailers in some of the most complex sectors for VAT : jewellers, chemists, food retailers and travel agents, to name a few.
Within the retail service sector, I have helped sporting membership clubs with bars and retail activities to manage their partial exemption, a dentist to achieve partial VAT recovery by diversifying their activities and many traditional shops to implement retail schemes and second hand margin schemes where applicable.
