Retail schemes ― direct calculation

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

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.

Overview

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

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

Businesses with a total retail turnover exceeding £130m per annum will need to agree a bespoke retail scheme with HMRC. See the Bespoke retail schemes guidance note for more information.

It is important to note that these thresholds apply to the whole turnover 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

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