VAT and Price Types
Understanding how VAT is applied to your ingredients is essential for accurate costings. Brikly handles the complexity of UK VAT rules so you do not have to think about them for every line item.
UK VAT rates
The UK applies three standard VAT rates to food and drink products:
| Rate | Value | Applies to |
|---|---|---|
| Zero-rated | 0% | Most basic foodstuffs (raw meat, fish, vegetables, bread, cereals, tea, coffee) |
| Reduced | 5% | Certain energy-saving products; rarely applies to food |
| Standard | 20% | Catering supplies, prepared foods, confectionery, alcoholic drinks, soft drinks, crisps, ice cream |
Common food VAT rates
| Product | VAT rate |
|---|---|
| Fresh meat and poultry | 0% |
| Fresh fish and seafood | 0% |
| Fresh fruit and vegetables | 0% |
| Bread and bakery (unpackaged, staple) | 0% |
| Milk, cheese, butter | 0% |
| Eggs | 0% |
| Rice, pasta, flour | 0% |
| Tea and coffee (unprocessed) | 0% |
| Cooking oils | 0% |
| Herbs and spices | 0% |
| Chocolate and confectionery | 20% |
| Crisps and savoury snacks | 20% |
| Ice cream | 20% |
| Soft drinks | 20% |
| Alcoholic beverages | 20% |
| Bottled water | 20% |
| Biscuits (chocolate-covered) | 20% |
| Biscuits (plain) | 0% |
| Cakes | 0% |
VAT on food can be surprisingly nuanced. A plain biscuit is zero-rated, but a chocolate-covered biscuit is standard-rated. A cake is zero-rated regardless of chocolate content. When in doubt, check the supplier's invoice - they should apply the correct rate.
VAT-inclusive vs VAT-exclusive pricing
Suppliers present their prices in one of two ways:
- VAT-exclusive (ex-VAT) - the price shown does not include VAT. VAT is added as a separate line at the bottom of the invoice. This is the most common approach for UK B2B suppliers.
- VAT-inclusive (inc-VAT) - the price shown already includes VAT.
Brikly needs to know which method a supplier uses so it can calculate the correct net cost for your ingredients.
How Brikly detects price type
When processing an invoice, Brikly looks for clues to determine the pricing method:
- Invoice labels - phrases like "Net", "Excl VAT", or "Ex VAT" indicate exclusive pricing. "Gross", "Incl VAT", or "Inc VAT" indicate inclusive pricing.
- Arithmetic validation - Brikly checks whether the line totals plus VAT equal the grand total (exclusive) or whether the line totals already include the VAT amounts (inclusive).
- Supplier history - if you have processed previous invoices from this supplier, Brikly uses the established price type.
Most UK food and drink suppliers (Brakes, Bidfood, local butchers, greengrocers) use ex-VAT pricing. Cash-and-carry wholesalers sometimes show inc-VAT prices. Brikly remembers the price type for each supplier after the first invoice.
Validation indicators
After extraction, Brikly validates the VAT calculations and flags any discrepancies:
| Indicator | Colour | Meaning |
|---|---|---|
| Valid | Green | Line totals, VAT, and grand total all reconcile correctly. |
| Minor discrepancy | Amber | Small rounding difference (typically a penny or two). Usually safe to accept. |
| Discrepancy | Red | The numbers do not add up. Review the extracted values and correct any errors. |
Common causes of discrepancies
- Rounding - suppliers may round VAT per line or on the total. A 1p difference is normal.
- Mixed VAT rates - an invoice with items at 0% and 20% can trip up extraction if the VAT breakdown is unclear.
- Extraction errors - a misread digit (e.g. "8" read as "6") will cause the totals to mismatch.
Credit notes are recognised as their own document type and validated on their own totals, so an all-negative document is not a discrepancy. See Credit Notes.
If you see a red discrepancy indicator, do not confirm the invoice without investigating. A misread price can propagate through your costings and affect dish margins.
When VAT appears only in the totals box
Some bills - phone lines, broadband, utilities, subscriptions - print no VAT against the individual lines at all. VAT appears once, in the totals box at the bottom. Brikly extracts these faithfully: the lines carry no VAT rate, and the header VAT is captured correctly.
Where the invoice arithmetic proves that every line is standard-rated (the lines add up to the ex-VAT subtotal, and the subtotal plus VAT at the standard rate lands exactly on the invoice total), Brikly fills in the standard rate on every line automatically during processing. There is nothing for you to do - the lines show the rate, and the bill submits with the correct VAT.
When the arithmetic cannot prove a single rate - a bill at the reduced rate, or a mix of rates - Brikly leaves the lines alone and asks you instead:
- The invoice shows a notice that the gap between the lines and the total matches the VAT on the invoice, pointing you at the line VAT rates rather than a missing line.
- Where one rate clearly explains the whole difference, an Apply VAT to all lines shortcut sets it on every line in one click.
- Otherwise, set the rate per line - see Reviewing an expense invoice.
An invoice that shows VAT in its totals but has no VAT rate on any line cannot be submitted to your accounting platform until the rates are set - the bill would otherwise go across zero-rated and short by the VAT amount. See Submitting to Accounting.
Setting the price type for a supplier
If Brikly cannot detect the price type automatically, or if it gets it wrong, you can set it manually:
- Go to the supplier's profile in Suppliers.
- Find the Price type setting.
- Select VAT-exclusive or VAT-inclusive.
- Save. All future invoices from this supplier will use the selected price type.
How VAT affects your costings
Brikly always stores ingredient costs as net (ex-VAT) values. This ensures your recipe and dish costings reflect the true cost of goods, regardless of how the supplier presents their prices.
- If a supplier charges ex-VAT, the extracted price is used directly.
- If a supplier charges inc-VAT, Brikly strips the VAT to arrive at the net cost.
This means your food cost percentages and margins are always calculated on a consistent, VAT-exclusive basis.