Short answer: for GP% and margin work, stock should be valued ex-VAT. The bigger point is consistency — if some lines in your valuation are priced inc-VAT and others ex-VAT, the total is wrong, and it will be wrong by an amount large enough to send you chasing a stock problem that doesn’t exist.
Why this is easy to get wrong without noticing
A pub’s till shows the shelf price a customer pays, which is VAT-inclusive by law. A stocktaker’s or an app’s valuation report, on the other hand, is often built to show the ex-VAT cost or value, because that’s the basis used for GP% and for most P&L reporting. Nothing forces these two systems to agree with each other, and nothing on the screen tells you which one you’re looking at unless the report says so explicitly.
I went through this directly while building StockTap. The app’s “Sell £” field writes to the underlying pour price field, and every price in the system is stored and displayed ex-VAT. That’s a deliberate, confirmed choice, not an assumption — and it matters, because a licensee entering shelf prices without knowing that basis will silently overstate every valuation by exactly the VAT fraction.
The maths, worked through once so you don’t have to guess
UK standard VAT is 20%, applying to sales above the current VAT registration threshold of £90,000 turnover. To go from a VAT-inclusive price to the ex-VAT price, divide by 1.2. To go the other way, multiply by 1.2.
| Basis | Price | Difference vs ex-VAT |
|---|---|---|
| Inc-VAT (shelf price) | £6.00 | +20.0% |
| Ex-VAT | £5.00 | — |
Put another way: a value that’s actually ex-VAT will look about 16.7% too low if you mistakenly treat it as inc-VAT, and a value that’s actually inc-VAT will look 20% too high if you treat it as ex-VAT. Neither error is small. Run that across an entire stock valuation and the total moves by a meaningful sum, and your GP% calculation — which divides cost by sale price — moves by several percentage points in the wrong direction. A pub running a genuinely healthy GP% can look like it’s underperforming, or a pub with a real problem can look fine, purely because of which basis two different numbers in the same calculation are using.
The single most common way this breaks
It isn’t usually one system being wrong. It’s two systems disagreeing, and a licensee copying numbers between them without checking the basis of either. A common version: the till reports sales inc-VAT because that’s the legal shelf price, the stocktaker’s report values closing stock ex-VAT because that’s the accounting convention, and a GP% is calculated by dividing one by the other without adjusting either. The two halves of the calculation are on different bases, and the result is wrong by a predictable, correctable margin — but only once you know to look for it.
How to check which basis you’re actually on
- Pick a product with a clean, round shelf price — say £6.00 a bottle.
- Work out its ex-VAT value: £6.00 ÷ 1.2 = £5.00.
- Open your stock or valuation report and find that same product’s unit value.
- If it shows £5.00, your system is ex-VAT. If it shows £6.00, it’s inc-VAT.
- Repeat for two or three more products across different categories — spirits, draught, packaged. Some systems apply VAT consistently everywhere; others don’t, especially if products were added at different times by different people.
Once you know the basis, the fix is simple: make sure every figure that feeds a single calculation — sales, cost, stock value — is on the same basis before you divide one by another. If you’re comparing your own figures against a stocktaker’s report, ask them directly which basis they use. It’s a one-line question and most stocktakers will answer it without hesitation, because the alternative is a licensee quietly distrusting a set of numbers for a reason that was never explained.
Where this connects to the wider stocktake picture
Getting the VAT basis right matters most when you’re trying to read variance and GP% together, because a basis error looks exactly like a trading problem until you isolate it. If you’ve read the numbers correctly and there’s still a gap, the more common causes are covered in the till button problem and in the causes checklist in what is an acceptable stocktake variance in a UK pub? And if a bad number has already been charged back to you, the evidential approach that actually reverses one is in how I got a stocktake chargeback reversed.
Common questions
Should a pub stock valuation be ex-VAT or inc-VAT?
For GP% and margin reporting, stock should be valued ex-VAT, matching how sales are usually reported net of VAT in a P&L. Whichever basis you choose, the point is consistency: every price in the valuation has to be on the same basis, or the total is meaningless.
What happens if some prices are ex-VAT and others inc-VAT in the same report?
The valuation total becomes internally inconsistent. At the UK standard VAT rate of 20%, a line priced inc-VAT sits about 16.7% higher in value than the same line ex-VAT, which is enough to swing a GP% calculation by several percentage points, or the site total by considerably more if the mixing is widespread.
How do I check which basis my till or stock system is actually using?
Take one product with a round shelf price, work out what it costs ex-VAT by dividing by 1.2, and compare that to what your system shows as the unit value in a stock report. If they match, you’re ex-VAT. If the shelf price matches instead, you’re inc-VAT. Do this for a handful of lines across different categories, not just one, because some systems apply VAT inconsistently across categories.