Andrew Needham looks at when a retail business must account for VAT on its taking when it uses a retail scheme.
Daily gross takings (DGT) are the record of the income a retailer receives and should include all payments for retail supplies as they are received from cash customers and the full value (including VAT) of all credit or other non-cash retail sales at the time they are made.
Details of any adjustments made to the DGTs should also be recorded.
What to include in DGT
A retailer must include all the following in its DGT as they are received from customers:
- cash;
- cheques;
- debit or credit card vouchers;
- Visa, Delta or similar electronic transactions; and
-
electronic cash.
This means that cheques and electronic payments are included in takings as they are received, not when the cheque clears, or electronic transfers are received.
A business must also include the following in its DGT on the day the supply is made:
- the full value of credit sales (excluding any disclosed exempt charge for credit);
- deposits (other than security deposits);
- the value of any goods taken out of the business for own use, the cash value of any payment in kind for retail sales; and
-
the face value of gift cards etc., redeemed.
A business should keep a separate record of goods supplied on a ‘sale or return’ basis. The business should only include the amount due for these in its DGT when the customer has adopted the goods.
A business must not reduce its DGT for till shortages which result from theft of cash, fraudulent refunds and voids or poor cash handling by staff. In HMRC’s view, the sale has been made, and the VAT is due even if the money is stolen from the till by an employee.
Record keeping
HMRC requires retailers to use the till roll or printouts from electronic tills as the prime record of the DGT, and it is this figure which is used when calculating output tax due under the chosen retail scheme.
What not to include in DGT
Retailers may reduce their DGT for the following:
- counterfeit notes;
- customer overspends on Shopacheck;
- inadvertent acceptance of a cheque guarantee card as a credit card;
- inadvertent acceptance of foreign currency;
- inadvertent acceptance of out-of-date coupons which have previously been included in DGT but which are not honoured by promoters;
- instalments in respect of credit sales;
- receipts recorded for exempt supplies;
- refunds to customers for overcharges or faulty or unsuitable goods;
- supervisor’s float discrepancies;
- till breakdowns (where incorrect till readings are recorded due to mechanical faults, for example, till programming error, false reading and till reset by engineer);
- unsigned or dishonoured cheques from cash customers (but not from credit customers); and
-
void transactions (where an incorrect transaction has been voided at the time of the error).
Practical tip
If a business operates a retail scheme, it is important to record the daily gross takings correctly so that it can account for the right amount of VAT at the right time to avoid any overpayments as well any possible underpayments with resulting assessments, penalties and interest.
