Industry sector: Retail and wholesale

Record shop: VAT

Record shops and VAT

You will have to register for VAT if your taxable sales are likely to be above the current VAT threshold. You will then have to charge VAT on some of the goods you sell - this is known as 'output tax'. You will be able to reclaim any VAT you pay on purchases - this is known as 'input tax'.

Every quarter you will pay HM Revenue & Customs (HMRC) the difference between:

  • all the output tax you have charged
  • all the input tax you have paid on your purchases

Nearly all businesses have to pay their VAT bill electronically - for example by direct debit or online banking. HMRC allows you some time at the end of each quarter before you have to pay the VAT due. So, for example, the VAT due on sales made in months one, two and three would be paid at the end of month four. Your VAT return will show your payment deadline date.

Businesses that are having trouble making their VAT payments, or are worried that future payments will cause them problems, can ask for help from the HMRC Business Payment Support Service. If your business needs this financial assistance to tide it over, HMRC will look at your situation and discuss temporary options that could help out. These could include letting you make payments over a longer period and waiving late payment surcharges. To discuss payment problems with HMRC you can call the Business Payment Support Service Helpline on 0300 200 3835.

Standard or zero rated?

Most of the items that you will sell are likely to be standard rated for VAT purposes, although it's possible that you may also sell items that are zero rated, such as books, magazines and children's T-shirts.

If you plan to deal in a significant amount of secondhand records you might want to use the secondhand margin scheme. This allows you to calculate how much VAT is due by reference to the difference between what you pay for the goods and what you sell them for (your 'margin') instead of on the full retail value of the goods. The margin includes the VAT due. There's more guidance in VAT Notice 718, Margin scheme and global accounting, which you can also download from the website.

Making Tax Digital (MTD) for VAT

Under HMRC's Making Tax Digital initiative, VAT-registered businesses with taxable turnover above the VAT threshold must keep records digitally and use special software to submit their VAT returns. You can find out more about MTD on the website.

Further information

You can contact the VAT Helpline on 0300 200 3700 for general VAT guidance and for advice on the liability of books and magazines which are packaged together with another item such as a CD. You can also download helpful leaflets such as VAT Notice 700/1, Should I be Registered for VAT? and VAT Notice 701/10 Zero rating of books etc from the website.

The helpline will also be able to advise you on using one of the Retail Schemes. These Schemes are used by businesses which deal mainly with members of the public.