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Retailers sell many items to the public rather than issuing an invoice for each sale, so the first priority is getting prices and rates right.

VAT-inclusive pricing requirements

All prices displayed to consumers must include VAT. This applies to shelf labels, price tags, online listings and advertising.

VAT-inclusive pricing

Retailers selling to consumers (B2C) must display VAT-inclusive prices. The price on the shelf or ticket is the price the customer pays.

B2C sales requirement: Prices displayed to consumers MUST include VAT
B2B sales: Can show VAT-exclusive prices if clearly stated (e.g., plus VAT)
Online prices: Must show VAT-inclusive price before checkout
Price labels: Must show total price including VAT in sterling
Dual pricing: Permitted to show both inc. and ex. VAT if VAT-inclusive is prominent
Additional charges: Delivery and other mandatory fees must be shown before checkout

VAT rates on different goods and services (opens in a new tab)

Mixed VAT rate sales

Many retailers sell goods at different VAT rates - standard-rated electronics alongside zero-rated food, for example. Understanding how to handle mixed supplies is essential for accurate VAT accounting.

Composite supply vs separate supplies

When you sell multiple items together, you must determine whether they form a single composite supply or separate supplies for VAT purposes.

This affects which VAT rate applies to the entire transaction.

Composite supply (single supply): One dominant element with ancillary items - all at one VAT rate
Separate supplies (multiple supplies): Distinct items priced separately - each at its own VAT rate
Key test - ancillary element: An element is ancillary if it does not constitute an aim in itself but is a means of better enjoying the principal service
Key test - closely linked: Elements are so closely linked that they form a single economic supply which it would be artificial to split
Example composite supply: Hot drink with a biscuit served in a cafe - single supply at standard rate
Example separate supplies: Book and DVD sold together - zero-rated book, standard-rated DVD (if priced separately)
Hampers and gift baskets: Mixed-rate items in hampers treated as separate supplies unless single price and elements not identifiable

VAT rates on different goods and services (opens in a new tab)

Show VAT-inclusive prices and charge the right rate