Accountants for shops and convenience stores

One basket, three VAT rates

A customer puts a loaf, a bar of chocolate and a hot pasty on the counter. The loaf is zero rated, the chocolate is standard rated, and the pasty is standard rated because it is hot. That happens several hundred times a day, and a single takings figure at the end of it tells you nothing about how much VAT you owe.

This is exactly what the VAT retail schemes exist for, and choosing the right one is one of the few decisions in a small shop that is worth real money:

• Point of Sale - the till splits sales by rate as they are rung through. The most accurate, and the right answer if your EPOS can do it.
• Apportionment - splits your takings in the same proportions as your purchases. Suits smaller shops without a rate-aware till.
• Direct Calculation - works out the minority-rated goods and treats the rest as the balance. Good where most of what you sell is one rate.

Estimating instead of using a scheme is the error we correct most often here, and it usually goes against the shop, not in its favour.

Commission is not turnover

PayPoint, lottery, mobile top-ups, parcel drop-offs, cash machines and Amazon lockers all put money through your business that is not your money. You are acting as an agent: your income is the commission, not the value of the transactions.

Treat the gross flows as sales and your turnover looks enormous, your margins look impossible, and you may appear to have crossed the VAT threshold when you have not. We separate agency income from your own sales as a matter of course.

Stock, staff and the rest

• Stocktake at the year end. Unsold stock is not an expense of the year, and a shop’s stock figure is usually its largest single balance. One count, done properly, changes the tax bill.
• Wastage and own consumption. Out-of-date stock written off, and goods taken for the family, both need recording - the second one is a genuine adjustment HMRC expects to see, not an awkward secret.
• Payroll for part-time and weekend staff, students, and family members.
• Business rates. Small business rate relief is worth having and is not always applied automatically.
• Alcohol and tobacco. Keep the purchase invoices. These are the categories HMRC tests first, by comparing what you bought with what you declared selling.