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 an invoice uses so it can calculate the correct net cost for your ingredients.
How Brikly detects price type
Brikly works the price type out afresh on every invoice:
- What the invoice prints - a separate VAT column or VAT amount means the line prices are ex VAT. Wording such as "inc VAT" or "including VAT" means they include it.
- Arithmetic validation - where the lines as printed add up to the invoice total rather than the ex-VAT subtotal, the printed prices must already include VAT, so Brikly reads every line on that invoice as VAT-inclusive.
Most UK food and drink suppliers (Brakes, Bidfood, local butchers, greengrocers) use ex-VAT pricing. Cash-and-carry wholesalers sometimes show inc-VAT prices. There is no price type setting on the supplier, so glance over the first few invoices from a cash-and-carry, and correct a line if one was read the wrong way.
Checking the totals
After extraction, Brikly adds up the line items, with VAT at each line's own rate, and compares them with the invoice total. When they agree, there is nothing to see. A small difference (up to 50p, or 1% of the total on a larger invoice) counts as rounding.
When they don't agree, the invoice summary shows a warning with both figures, for example "Line items add up to £129.52, but the invoice total is £126.57 (£2.95 difference).", and what to check:
| The warning ends | What it usually means |
|---|---|
| "Check for a missing or misread line." | The lines come to less than the total: a delivery charge or a line the extraction missed. Add the missing line fixes it in one step. |
| "Check for a line that was read twice or a wrong quantity, and edit or remove it." | The lines come to more than the total. |
| "The lines look like they already include VAT. Tick Line total includes VAT on them." | Lines whose prices include VAT were read as ex VAT, so VAT was added on top. On an expense invoice the warning ends "Set To pay on those lines to the amount printed on the invoice." instead. |
| "The VAT printed on some lines does not match the rate set on them. Check the VAT rate on those lines." | A line's VAT rate is wrong for the VAT the supplier printed on it. |
Two other differences get their own note instead: one that matches discounts you have not applied yet shows a blue note (apply them and the totals reconcile), and one that matches the VAT on a bill whose lines have no VAT rate is covered below. See When line items don't add up for what each case means when you send the bill.
Common causes of discrepancies
- Rounding - suppliers may round VAT per line or on the total. A few pence is normal. On Xero and Sage, Brikly sends the invoice's own VAT so the bill matches what you were charged - see When VAT rounding is a few pence out.
- 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 checked on their own totals, so an all-negative document is not a discrepancy. See Credit notes.
If the totals don't add up, find out why before you rely on the invoice. Its matched prices are already on file, so a misread price may already be in your costings and dish margins. Correct the line, or delete the invoice if it was the wrong file.
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 [rate] VAT to all lines shortcut (for example Apply 5% VAT to all lines) sets it on every line in one click.
- Otherwise, set the rate per line - see Reviewing an expense invoice.
A line with no VAT rate shows Set VAT in its VAT box rather than a rate, so it is easy to spot. Where the line prints a VAT amount that implies a rate, the VAT row underneath shows the figure at that rate.
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. A line that prints a VAT amount but has no rate is posted at the rate that amount implies (20%, 5% or 0%, to within 2p); if it matches none of them, set the rate on that line before submitting - see Lines that print VAT but have no rate.
Correcting the price type on a line
If Brikly reads a line's price the wrong way (as ex VAT when the printed price already includes VAT, or the other way round), correct it on the line. On a food and drink invoice:
- Click Edit on the line.
- Tick or untick Line total includes VAT. The Ex VAT total beside it works itself out again.
- Click Save changes.
The correction applies to that line, and Brikly costs the line again from it. The next invoice from the supplier is read on its own, so there is nothing to change on the supplier. See Editing line items in full.
An expense invoice has no Edit form or tick on its lines: click the line's To pay figure and enter the amount printed on the invoice.
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.
- If an invoice prints an ex-VAT unit price beside a VAT-inclusive line total, Brikly uses the unit price as printed rather than taking the VAT off it a second time. A unit price of £7.99 printed beside a total that includes VAT is costed at £7.99, while a receipt price of £6.00 including 20% VAT is costed at £5.00.
The line's price card, the supplier verification forms and the Create new consumable preview all show this same ex-VAT costing figure. The price card shows an inc VAT figure beneath it only when the printed price itself included VAT.
This means your food cost percentages and margins are always calculated on a consistent, VAT-exclusive basis.
Prices you type in
The same holds for a price you enter by hand. Where a form offers a VAT tick (Price includes VAT, Includes VAT or This price includes VAT, depending on the form), it is a typing helper: tick it and choose the rate, and Brikly takes the VAT off once, shows you the ex-VAT pack price, for example "We'll save £5.00 a pack, ex VAT (20%).", and saves that figure. Because the saved price is already ex VAT, the tick starts unticked the next time you open the form. The one exception is an older supplier price that was saved including VAT, which still opens ticked on Edit supplier.