Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

VAT Retail schemes guidance

HM Revenue & Customs
, see all updates

Mechanics of the standard retail schemes: Expected selling prices (ESPs)


The expected selling prices (ESPs) of goods received, made or grown for retail sale are used in the second apportionment scheme and both direct calculation schemes to determine the value or proportion of retail sales at different rates of tax. The ESP is not the same as the retail selling price or the shelf price, but is designed to reflect the value the retailer is expected or likely to receive for the goods actually sold by retail sale.

Example 1

A supermarket receives 1,000 loaves of bread for retail sale with a shelf price of 50p per loaf. This gives a potential retail value of £500. But the retailer uses 10 loaves in the staff canteen; sells 20 wholesale to a local corner shop, which has run out; and has to reduce the shelf price when the sell-by date arrives. In total, he actually receives only £410 for the loaves sold by retail.

Example 2

A CTN receives 1,000 packets of cigarettes with a retail selling price of £4.20 each. The shop is broken into and 500 packets are stolen. Instead of receiving the retail value of £4,200 for the goods, the retailer receives £2,100.

If only the shelf or retail selling price were used, the retailer has overstated the ESP; if the retailer adjusts to take account of the goods used in the canteen and the sell-by date reductions, but not the goods stolen or disposed of by wholesale rather than retail sale, the ESP will still be overstated. This will affect the retail scheme calculation and, for this reason, the retailer is required to make various adjustments. Notices

  • 727/4 Retail schemes: How to work the apportionment schemes and
  • 727/5 Retail schemes: How to work the direct calculation schemes 

detail factors that should be taken into account when setting ESPs.