The direct calculation schemes (ESP1 and ESP2) are used to calculate output tax on supplies of goods and services at more than one rate of tax. The schemes are described in Notice 727/51.
Direct calculation/ESP schemes—general
The ESP schemes work by calculating the expected selling prices of goods purchased for resale. The schemes only require that the expected selling prices of so-called 'minority goods' are calculated. These are goods at the rate of tax which form the smallest proportion of all retail supplies made. However, in the case of ESP1 only, it is possible to calculate the expected selling prices of majority goods where this is easier2 (for example, in the case of a newsagent it may be easier to mark up the prices of magazines and newspapers, where there would be a limited number of purchase records).
It is important that expected selling prices are calculated accurately, otherwise the scheme calculation will be incorrect3.
HMRC allows various methods of calculating expected selling prices4. A retailer will normally
To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to Tolley+™ Research or register for a free trial
Web page updated on 17 Mar 2025 15:26