VAT Scheme Analysis & Confirmation for Pharmacies and Pharmacists
-
30+ years of experience
-
Specialised Pharmacy VAT Expert in UK
What does our VAT scheme analysis service include?
You get a start to finish review led by a VAT accountant and VAT consultant team that understands mixed supplies, partial exemption and NHS timing.
- Business model discovery
- Map revenue streams across NHS dispensing, private prescriptions, OTC retail, travel clinic services, Pharmacy First, smoking cessation, ear care, weight management, flu jabs and diagnostics.
- Identify who supplies what and where, for single pharmacies, multi-branch groups and locum or contractor pharmacists.
- Map revenue streams across NHS dispensing, private prescriptions, OTC retail, travel clinic services, Pharmacy First, smoking cessation, ear care, weight management, flu jabs and diagnostics.
- Scheme suitability testing
- Compare Standard Rate, Flat Rate Scheme and pharmacy Marginal Rate methodology against your actual mix, margins and input VAT profile.
- Model partial exemption and retail scheme implications where relevant.
- Compare Standard Rate, Flat Rate Scheme and pharmacy Marginal Rate methodology against your actual mix, margins and input VAT profile.
- Till and bookkeeping alignment
- Build an EPOS VAT map for 20 percent, 5 percent, zero rated, exempt and outside scope items.
- Configure Xero VAT codes and tracking so postings match the chosen scheme.
- Build an EPOS VAT map for 20 percent, 5 percent, zero rated, exempt and outside scope items.
- Cash flow and compliance projection
- Forecast quarterly or monthly VAT payable or reclaimable under each option.
- Stress test for seasonality, buying group rebates, supplier credit notes and delivery charges.
- Forecast quarterly or monthly VAT payable or reclaimable under each option.
- Formal confirmation and implementation
- Issue a written recommendation signed by a VAT expert with rationale, calculations and assumptions.
- Train your team, update process notes and set controls for ongoing accuracy.
- Issue a written recommendation signed by a VAT expert with rationale, calculations and assumptions.
What will you get from this service?
Clients receive a simple decision, a working setup and measurable benefits.
- A single recommended scheme with a clear pass or fail for Flat Rate and Marginal options, and a Standard Rate fallback that protects compliance.
- Higher quality VAT returns because EPOS, Xero and month end reconciliations match your VAT treatment and partial exemption logic.
- Stronger cash flow through accurate monthly reclaims where appropriate and fewer HMRC queries.
- Less admin thanks to clean VAT codes, digital capture and a reconciliation pack your team can run every period.
- Defensible paperwork that answers HMRC questions on why the scheme was chosen and how rates are applied in real life.
Which VAT scheme actually fits a pharmacy?
The right scheme depends on your sales mix, input VAT level and how much is exempt or zero rated. If a large part of turnover is exempt or zero rated, the Flat Rate Scheme is usually poor value because the fixed percentage often exceeds the VAT you would pay under Standard Rate once partial exemption is applied. If your OTC retail share is high with limited exempt activity, Flat Rate can be tested but only with real numbers.
Standard Rate with partial exemption
- Works best where purchases carry material input VAT and you want to reclaim accurately.
- Needs a robust method to split taxable and exempt supplies and a clean annual adjustment.
Flat Rate Scheme
- Can simplify reporting for very small operators but often costs more for pharmacies with meaningful input VAT or zero rated sales.
- Requires a like for like comparison using your last four periods of data, not headline percentages.
Pharmacy Marginal Rate approach
- Supports calculation of recoverable VAT relating to NHS prescription income and Rx statements when standard apportionment is not reflective.
- Needs consistent treatment of monthly PPD, Rx reconciliations and supporting worksheets.
How do pharmacist-led services change the answer?
Service mix changes VAT recoverability and scheme choice. If you provide more private clinical services, consultation fees and diagnostics, taxable and exempt balances move, which alters partial exemption and any retail apportionment. If you mainly dispense NHS prescriptions with limited private work, the focus shifts to Marginal Rate and retail scheme accuracy rather than Flat Rate.
- Dispensed NHS prescriptions are generally exempt supplies that drive partial exemption limits.
- Private prescriptions and OTC sales are usually taxable and improve input VAT recovery percentages.
- Clinical services such as vaccinations and Pharmacy First may be exempt when they are medical care, but associated fees and products can differ and must be coded correctly.
How do we test Standard vs Flat vs Marginal using your data?
A numbers-first approach gives a reliable answer. If we rely on averages, you risk higher VAT costs or wrong reclaims.
- Data set up
- Pull 12 months of sales split by NHS, private Rx, OTC and services.
- Pull purchases grouped by VAT rate and by function including overheads.
- Pull 12 months of sales split by NHS, private Rx, OTC and services.
- Model build
- Run Standard Rate with partial exemption using your true ratios.
- Run Flat Rate using your actual gross turnover and applicable percentage.
- Run the Marginal Rate calculation on Rx statements with the same period scope.
- Run Standard Rate with partial exemption using your true ratios.
- Decision rules
- Select the lowest compliant net cost with acceptable HMRC risk.
- Reject Flat Rate if it creates a higher cost than Standard Rate after partial exemption.
- Calibrate Marginal Rate outputs against retail scheme and partial exemption to avoid double counting.
- Select the lowest compliant net cost with acceptable HMRC risk.
How does partial exemption influence the choice?
Partial exemption decides how much VAT you may reclaim on overheads. If exempt income is high, your recoverable percentage falls, which usually pushes the decision toward Standard Rate with careful calculation rather than Flat Rate shortcuts.
- Method selection
- Use the standard method unless a special method clearly reflects your mix better and is justifiable.
- Use the standard method unless a special method clearly reflects your mix better and is justifiable.
- Controls
- Tag residual input VAT, run monthly calculations and true up annually with a simple workbook.
- Tag residual input VAT, run monthly calculations and true up annually with a simple workbook.
- Outcome
- Protect reclaims on utilities, rents, software and sundry costs while staying inside the de minimis limits where possible.
What documents do we need to confirm the scheme?
Good evidence speeds analysis and reduces rework. If we guess, you pay more VAT or face avoidable questions.
- Last 12 months sales by category from EPOS and accounting system.
- Last 12 months purchase invoices summarised by VAT rate and supplier.
- NHS Rx statements and PPD schedules for the same period.
- Lists of services offered with pricing and whether provided by pharmacists or support staff.
- Details of buying group rebates, supplier commissions and credit notes.
How do we implement the decision across tills and bookkeeping?
Implementation focuses on till rates, Xero VAT codes and a repeatable close. If these are out of sync, the right scheme still produces wrong returns.
- EPOS configuration
- Map barcodes and PLUs to 20 percent, 5 percent, zero rated, exempt and outside scope.
- Test receipts for top sellers to prove rates are correct.
- Map barcodes and PLUs to 20 percent, 5 percent, zero rated, exempt and outside scope.
- Xero setup
- Create sales and purchase VAT codes aligned to the chosen scheme and partial exemption method.
- Build tracking for branches and service lines to support the annual adjustment.
- Create sales and purchase VAT codes aligned to the chosen scheme and partial exemption method.
- Period close
- Reconcile DGT, Rx statements, supplier rebates and import VAT.
- File MTD returns with a supporting pack signed by your VAT consultant.
- Reconcile DGT, Rx statements, supplier rebates and import VAT.
What are the common risks we remove for you?
Typical pharmacy errors come from misclassified services, inconsistent till rates and missing partial exemption logic. If left unchecked, these cause refund delays or assessments.
- Flat Rate chosen without proof and costing more than Standard Rate.
- Till buttons coded as 20 percent for zero rated products or vice versa.
- Private consultation fees treated as exempt when 20 percent applies.
- Residual input VAT fully reclaimed without a partial exemption calculation.
- Marginal Rate applied without matching retail scheme or partial exemption, leading to double counting.
What happens next?
Pharmacies can share the latest Rx statement, EPOS sales summary and purchase VAT totals so we can run a free scheme comparison and show the saving or risk in pounds. If you want to proceed, we issue a fixed scope and deliver a signed recommendation, system changes and a first close under the chosen scheme.
RX Virtual Finance LTD is your specialist VAT accountant, VAT consultant and VAT expert for pharmacy VAT scheme analysis, selection and implementation across Standard Rate, Flat Rate and pharmacy Marginal Rate methods.
