How we calculate VAT

We calculate VAT at point of sale in accordance with HMRC guidelines. This means that when you buy multiple items at the same time you might pay slightly more VAT (and therefore a slightly higher overall price) than you would pay if you bought single items separately.

How we calculate VAT for our price labels

By law we are required to add VAT to the price of our items. The current standard rate of VAT is 20%.

We sell our products to trade and non-trade members so we always display on our price labels both the VAT exclusive price (i.e. the price before VAT has been added) and a VAT inclusive price (i.e. the price after VAT has been added) for a single sell item.

To generate our VAT inclusive prices, we take the VAT exclusive price and add VAT. If the result is a number with more than 2 decimal places, we round the number down and this is the VAT inclusive price we show on our price labels and coupons. This calculation is shown in the example below.

Example 1: How we calculate VAT inclusive prices for our price labels

Item: Men’s crew neck T-shirts – 6 pack

  VAT exclusive price: £11.99
  VAT at 20%: £2.398
  VAT inclusive price: £14.388
  VAT inclusive price rounded down: £14.38
  VAT inclusive price shown on the price label: £14.38

 

How we calculate VAT at point of sale

At point of sale, we add up the VAT exclusive prices of all the items you purchase and the applicable VAT on those prices. If the result is a number with more than 2 digits after the decimal point, we round the number down to 2 decimal places.

Because we are only able to round down the total price rather than the price of each individual item, when you buy multiple items at the same time you might pay slightly more VAT (and therefore a slightly higher overall price) than you would pay if you purchased single items separately. This is shown in the examples below.

Example 2: How we calculate VAT inclusive prices at point of sale – single items

Item: Men’s crew neck T-shirts – 6 pack

  VAT exclusive price: £11.99
  VAT at 20%: £2.398
  VAT inclusive price: £14.388
  VAT inclusive price rounded down: £14.38
  VAT inclusive price shown on the price label: £14.38
  The price you pay: £14.38

 

Example 3: How we calculate VAT inclusive prices at point of sale – multiple items

Items: 2 packs of Men’s crew neck T-shirts – 6 pack

  VAT exclusive price: £23.98 (2 x £11.99)
  VAT at 20%: £4.796
  VAT inclusive price: £28.776
  VAT inclusive price rounded down: £28.77
  The price you pay: £28.77
  Difference in VAT and overall price: £0.01
(compared to items purchased separately)
£0.01

 

As these examples show, the difference in VAT payable on multiple item purchases compared with single item purchases will be no more than a few pence on a typical transaction.

A full breakdown of the VAT you pay on each purchase will be shown on your till receipt.

If you have any questions about this guide please contact us at: memberservices@costco.co.uk