Direct Calculation Schemes

Direct calculation schemes are fairly simple to operate if you make a small proportion of sales at one rate of VAT and a large majority at another rate.

Retail turnover - excluding VAT - of not over £1 million

To use this direct calculation scheme:

• Work out the Expected Selling Prices (ESPs) of your goods for retail sale at the different rates of VAT - for example, by marking up each line or group of goods, or by using the recommended retail price. Generally you calculate the selling price of your ‘minority goods’. These are the goods at the rate of VAT which forms the smallest proportion of your retail sales.
• Deduct the total sales value of your minority goods from your daily gross takings to give you the total figure for your VATable sales.
• To find the amount of VAT payable, you apply the relevant VAT fraction to this amount.

However, you may use the total selling price of your ‘majority’ goods if this would be a simpler option for your business and would produce a fair and reasonable result.

You cannot use this scheme for if you sell catering services.

Retail turnover - excluding VAT - of not over £100 million

To use this direct calculation scheme, you calculate your VAT in exactly the same way as if your sales were not over £1 million, except that you need to make an annual stock adjustment.

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