Your accountant needs one number from the bar: the value of your stock, at cost, on the last day of your financial year. That number moves your profit pound for pound, and your tax bill with it. And in a trade where the stock is the business, an awful lot of pubs still hand over a round-number guess and hope. This is how to produce the real figure: the valuation rule HMRC actually applies, the VAT wrinkle, what to do with part bottles and half-full kegs, and what a guessed number quietly costs.

Usual caveat. I'm a licensee, not an accountant. This is the counting end of the job, which is the end I know. Your accountant owns the accounts.

The rule: lower of cost and net realisable value

There is a real rule and it's older than every pub app put together. Trading stock is valued at the lower of cost and net realisable value, a principle HMRC's own manual traces to a 1949 case, CIR v Cock Russell & Co Ltd. The newer accounting standards say the same thing in worse words: FRS 102 and FRS 105 call it "estimated selling price less costs to complete".

In plain English: your stock is worth what you paid for it, unless it's now worth less than you paid, in which case it's worth the lower figure. You never value stock at what you'll sell it for. The profit in it hasn't happened yet, and the whole point of the accounts is to not count profit before it exists.

For a pub, the "unless" clause bites in exactly one place: stock you can't sell at full price any more. Out-of-date bottled ale, a discontinued line nobody orders, the novelty gin from two Christmases ago. That's dead stock, it gets valued down or written off, and doing so is allowed, not naughty. I've written about finding and dealing with dead stock separately, and year-end is the natural moment to face it.

What "cost" includes, and the VAT wrinkle

Cost means what you actually paid, plus the incidental costs of getting it to you. HMRC's manual is explicit that the purchase price includes expenses incidental to acquisition, so delivery charges on that pallet belong in the stock value.

VAT is the wrinkle that catches people. If you're VAT registered, you value stock ex VAT, because the VAT on the invoice was never a cost to you: you claimed it back. If you're not registered, the VAT is part of what the stock cost you, so it stays in. Most trading pubs are registered, so for most pubs the answer is ex VAT, and if the ex-VAT habit isn't second nature yet, read ex VAT versus inc VAT before you price a single bottle. The tills read one way, the accounts read the other, and mixing them is the classic way to hand your accountant a fiction.

Price each line at what you last paid for it, off the invoice, not off a price list from March. Supplier prices moved all year, and if you weren't tracking them as they moved, that's its own leak.

What a guessed number costs, both ways

Here's the sum that should end the guessing. Closing stock is added back to your profit. Overstate stock by £1,000 and your taxable profit is £1,000 higher this year: at the 19% small profits rate of corporation tax that's £190 of tax on stock you don't have, and for a sole trader paying income tax plus Class 4 National Insurance on it, more. Understate by £1,000 and the profit shifts into next year instead, which sounds free until you remember that banks, brewers and anyone valuing the business read those accounts, and you've just made a trading year look worse than it was. That arithmetic is mine, from the rates above, but the direction of it is just how accounts work.

A proper count of a small pub's stock takes an evening. It is the best-paid evening's work in the building.

Counting it: everything, everywhere, including the embarrassing shelf

The count itself is a full stocktake with the pricing done at cost. Cellar, shelves, back store, cold room, spirits cupboard, post-mix boxes, and food if you do food. The places people skip are the places the value hides.

Part bottles count. A back bar of open spirits can hold hundreds of pounds at cost, and estimating it by eye is where valuations go soft. Weighing beats tenths for accuracy, and I've set out both methods in counting spirits and part bottles. Part kegs and casks count too: a half-full 50-litre keg is real money, and keg calibration is how you read it without guessing.

Two edge cases to flag to your accountant rather than solve yourself. Stock delivered before year-end but invoiced after still belongs in the count, with the invoice accrued. And genuine sale-or-return stock may not be yours to value at all, so say so if you hold any.

Count on the day, or roll to the day

The clean version is a count on the year-end date itself, before trade or after close. Real pubs have real Saturdays, so the accepted alternative is a count a few days either side, rolled to the date using the deliveries and sales in between. The professional stocktaking firms offer exactly that adjustment when they certify year-end figures after the event. If you roll, keep the workings: the count sheet, the delivery notes and the till totals for the gap days. The number is only as defensible as the paper behind it.

Who has to sign it?

For a small pub, nobody insists on an outsider. Your own count, dated, priced at cost and kept with its workings, is normally exactly what your accountant wants. Some accountants, and some lenders, prefer an independent certificate, and ILTSA-accredited stocktakers provide year-end valuations and certification as a standard service. If you already pay for a regular independent audit, ask them to time a visit to the year-end and the certificate comes with it. What those visits cost is in the stocktaker cost guide.

If you count with StockTap, the Valuation report prices up your count, dated, with everything held ex VAT, and exports to CSV. Hand that file and your cost-price basis to your accountant and this whole article becomes a five-minute job. That's the honest limit of the pitch: the software doesn't change the rule, it just does the pricing arithmetic without a calculator and a biro at midnight.

What this number is not

Don't confuse the year-end valuation with stock at valuation on a changeover, the walk-in count when a pub changes hands. Same counting skills, different purpose, different pricing conventions, and usually a valuer acting for each side. That world is covered in taking over a pub. And neither of them is a valuation of the business itself. This is just the stock, at cost, on one date, done properly.

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