NHS RX PPD Marginal Rate Calculation & Reconciliation for Pharmacies
-
30+ years of experience
-
Specialised Pharmacy VAT Expert in UK
What does our end-to-end service include?
You get a start-to-finish service led by a pharmacy VAT Accountant and VAT consultant team that builds a defensible RX marginal rate model, applies it to the PPD statement, and reconciles it to bookkeeping.
- PPD data capture and validation
We ingest the monthly RX PPD (FP35) statement, check dates, dispense volume, fees, clawbacks and locally enhanced services, and tie the totals to your bank receipts. - Marginal rate methodology and worksheet build
We design a pharmacy-specific marginal rate calculator that separates exempt NHS elements from taxable components, applies the correct VAT fractions to the marginal element, and documents assumptions for HMRC. - Bookkeeping integration (Xero)
We configure Xero VAT codes to mirror the worksheet, post RX accruals where statements arrive in arrears, and create journals that separate exempt income, marginal VAT and outside-scope items. - Retail scheme and partial exemption alignment
We align the marginal rate output with any retail scheme workings and your partial exemption method to prevent double counting on residual input VAT. - Supplier & EPOS link-through
We reconcile OTC EPOS DGT totals and supplier invoices (including buying group rebates and commission notes) so pharmacy VAT treatment is consistent across sales and purchases. - Assurance pack for every period
We produce a signed working paper pack with the RX PPD schedule, marginal rate calc, journals, reconciliations and a variance analysis to prior months. - HMRC defence and improvements
We handle HMRC questions as your VAT Expert, and refine the model when service mix, fees or funding lines change.
What will you get from this service?
Clients receive correct reclaims, fewer queries and clear paperwork you can trust.
VAT Reclaim Accuracy
Accurate VAT reclaim each month using a tested marginal rate method tied to your RX PPD totals.
Faster Refund
Faster refunds and steadier cash flow because accruals and journals match the statement timing.
HMRC Compliance
Lower HMRC risk with clear evidence explaining how the marginal element and VAT fractions were calculated.
Reconciled Accounts
Clean books in Xero where exempt NHS income, marginal VAT and OTC retail are posted to the right codes.
Error Free VAT Return
No double counting because the marginal rate result is reconciled to the retail scheme and partial exemption.
Operational Flexibility
Less admin as we deliver a repeatable month-end pack your team can file under MTD with confidence.
Stop Guessing Your Marginal Rate. Start Defending It
Inaccurate PPD reconciliations are a red flag for HMRC. Our end-to-end VAT service builds a bulletproof, defensible model that ensures your reclaims are 100% accurate and fully auditable. Don’t wait for an investigation to find out you’ve overpaid.
Contact Information
How do we calculate the marginal rate on RX PPD (FP35) correctly?
We start with your PPD statement and isolate the parts that create a taxable “marginal” element, then apply the correct VAT fraction to that element only.
- Step 1: Build the base
Pull gross RX totals, fees, allowances, clawbacks, advanced payments and adjustments from the FP35. Confirm the banking aligns with the statement date. - Step 2: Segment the income
Separate exempt NHS supplies from elements that generate a taxable margin. Document each line’s VAT behaviour and any regional variations. - Step 3: Apply VAT fractions
Use the appropriate VAT fraction (for example 1/6 for 20 percent) to the marginal portion only, not the whole statement. Record the rationale in the worksheet. - Step 4: Post to Xero
Create journals that recognise exempt income, marginal VAT, and any timing accruals, mapped to your pharmacy Xero VAT codes. - Step 5: Reconcile and sign-off
Tie back to EPOS DGT, supplier credits, rebates and the bank. Sign off with a variance explanation to prior month and year-to-date.
How do we avoid double counting with retail schemes and partial exemption?
We cross-check the marginal output against retail scheme apportionments and partial exemption to make sure the same VAT isn’t reclaimed twice.
- Retail scheme guardrails
Where an apportionment or direct calculation scheme is in use, we reconcile standard, reduced and zero-rated proportions to ensure the marginal VAT does not overlap with retail outputs. - Partial exemption controls
We tag residual input VAT and run monthly partial exemption percentages with an annual true-up, so the marginal reclaim sits alongside the PE method without duplication. - Clear audit trail
The pack shows where each figure comes from, how it flows to the VAT return, and why.
How are PPD timing and accruals handled to keep cash flow smooth?
Statements arrive in arrears, so we use accruals to keep VAT returns aligned to activity, not cash.
- Month-end accrual
We estimate the RX marginal VAT for the month just ended using volume and pricing trends, then true up when the FP35 lands. - Variance thresholds
We set materiality rules to adjust only meaningful differences, keeping admin light while accuracy stays high. - Cash-to-VAT bridge
A simple bridge explains why the banked PPD differs from the VAT-calculated month—useful for owners and HMRC.
Which documents do we need to start fast and stay accurate?
Good inputs mean accurate outputs and fewer reworks with HMRC.
- Latest 6–12 months RX PPD (FP35) statements and bank statements for receipt matching.
- EPOS DGT reports and OTC sales splits by VAT rate.
- Purchase summaries by VAT rate, including medicines, devices and sundries.
- Buying group rebates, supplier commission statements and credit notes.
- Current Xero VAT codes, chart of accounts and any retail scheme or partial exemption workbooks.
What errors do we remove that commonly cost pharmacies money?
We target high-impact mistakes that overstate payments or understate reclaims.
- Treating the entire RX PPD value as taxable instead of only the marginal element.
- Missing the VAT fraction method or using the wrong fraction.
- Ignoring timing, causing mismatches between statements, bank and VAT returns.
- Double counting with retail scheme outputs or partial exemption.
- Posting rebates and commission notes as negative purchases without reverse VAT logic.
- Leaving EPOS rates mis-mapped, pushing too much turnover into exempt and reducing recoverable input VAT.
How do we embed the process so it runs every month?
We pair tools, templates and training so the calculation is quick, repeatable and auditable.
- Templates for marginal rate, PE, and a retail scheme cross-check.
- Xero automation for recurring journals and standard mappings to VAT Accountant-approved codes.
- Checklists for PPD arrival, accrual reversal, posting, reconciliation and sign-off.
- Quarterly reviews by a VAT Expert to refresh assumptions when fees or service mix change.
What happens next?
Pharmacies can share the latest FP35, an EPOS DGT report and a purchase VAT summary. We will produce a sample marginal rate worksheet, show the reclaim impact and issue a fixed-fee proposal to implement, reconcile and file under MTD.
RX Virtual Finance LTD — your pharmacy-specialist VAT consultant, VAT Expert and VAT Accountant for NHS RX PPD marginal rate calculation, reconciliation and HMRC-ready documentation.
