Bespoke retail scheme was not fundamentally flawed

The taxpayer adopted a bespoke retail scheme from December 2002 until March 2017. A bespoke scheme is one that has been formally agreed in writing with HMRC and is relevant to any retail business with annual sales exceeding £100m.

The scheme worked by calculating the expected selling price of zero-rated purchases and then deducting this figure from the gross takings figure at the end of each period so that the remaining sales were standard rated and subject to output tax. The marked-up figure for zero-rated items was adjusted for theft returned and damaged goods.

The company left the scheme and adopted a new one from 27 March 2017. This was based on an EPOS (electronic point of sale) system - the VAT liability was determined as each sale was made. However HMRC concluded that the March 2017 return the last period for the old scheme ...