This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Business Income Manual

Value Added Tax: value of stock in trade

Where the trader is a taxable person for VAT, the cost of purchases etc debited in the computations for tax on trade profits purposes is the cost exclusive of VAT. Similarly, the sales are exclusive of VAT. Accordingly, in valuing stock in trade etc. at cost or market value, if lower, it is permissible to take into account the cost exclusive of VAT and the market value exclusive of VAT. Similarly, professional work in progress may be based on figures exclusive of VAT where the business supplies services chargeable to VAT. Where the trader is exempt (or where his taxable turnover does not exceed the specified limit and they have not opted to register, see BIM31515), the cost or market value should be the amount inclusive of VAT. These broad rules need appropriate modification where the trader is partially exempt (see BIM31540).