Value Added Tax

Retail schemes ― direct calculation

Produced by Tolley
  • 22 Nov 2021 07:02

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Retail schemes ― direct calculation
  • Overview
  • Using Direct Calculation with other schemes
  • Records
  • Calculations
  • Calculating the ESP
  • Setting the ESP for zero-rated retail goods
  • Setting the ESP for standard-rated goods
  • Annual adjustments
  • Zero-rated ESP
  • More...

Retail schemes ― direct calculation

This guidance note provides an overview of the two Direct Calculation retail schemes and should be read in conjunction with the Retail schemes – overview and Retail schemes – specific industries guidance notes.


Businesses can only use this scheme if the total retail turnover does not exceed £130m per annum. If the total turnover exceeds this threshold the business will need to agree a bespoke retail scheme with HMRC. See the Bespoke retail schemes guidance note for more information.

The following thresholds apply to businesses wishing to use a Direct Calculation scheme:

SchemeTurnover limit
Direct Calculation scheme 1Total retail turnover must not exceed £1m
Direct Calculation scheme 2Total retail turnover between £1m - £130m

It is important to note that these thresholds apply to the whole VAT registration and not just to the value of the retail sales made by the business.

Businesses using the schemes need to calculate the Expected Selling Price (ESP) of the retail goods sold at one or two VAT rates in order to identify the proportion of the Daily Gross Takings (DGT) that relates to sales at each VAT rate.

Business are usually required to calculate the ESP of the 'minority goods'. These are the goods that represent the smallest proportion of the overall retail supplies. However, businesses using Direct Calculation scheme 1 can elect to calculate the ESP of the majority goods if this is more straightforward. Once businesses have started to set the ESP for minority

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information


Popular Articles

Capital vs revenue expenditure

Capital vs revenue expenditureExpenditure of a capital nature is not allowed as a deduction when calculating trading profits. Expenditure of a revenue nature is allowable, provided there is no specific statutory rule prohibiting a deduction and the expenditure also satisfies the wholly and

25 Oct 2021 07:01 | Produced by Tolley Read more Read more

Effective tax rate planning

Calculation of the effective tax rateAn international group’s effective rate of tax is usually calculated as the amount of tax it pays divided by its consolidated profits. The effective tax rate depends largely on:•the rate of tax paid by each company in the group•the companies in which profits are

03 Nov 2021 16:11 | Produced by Tolley in association with Anne Fairpo Read more Read more

Definition of a close company

The detailed definition of a close company is set out below but in summary the rules are targeted at those companies where the owners can manipulate the activities of the company to influence their own tax position. Therefore, broadly speaking, most owner-managed or private family businesses will be

22 Oct 2021 10:21 | Produced by Tolley Read more Read more