One supplier quotes 1,000 plus VAT and another 1,120 including VAT; which is cheaper?
With 15 entered as the rate, the tax-inclusive 1,120 is cheaper. Add tax to the first quote and it becomes 1,150; or extract tax from the second and its net is 973.91 against 1,000. Either way the second supplier saves you 30 in total, even though the number on its quote is bigger.
Why the two numbers mislead you
1,000 looks smaller than 1,120, and your brain compares what it sees. But nothing has been added to the first yet, while the second is complete. It happens a lot when one supplier states prices exclude VAT in small print at the bottom of the page and another sends a final figure.
The rule: only compare two figures on the same basis, either both before tax or both including it.
Two routes to the same answer
- Gross basis: in the VAT calculator, choose add, and enter 1000 with the rate that applies to your purchases, here 15. Gross 1,150. Compare it with 1,120.
- Net basis: choose extract and enter 1120 at the same rate. Net 973.91, tax 146.09. Compare it with the first quote of 1,000.
Which basis should you use? If you reclaim tax on purchases, the net basis reflects your real cost. If you cannot, the gross basis is what actually leaves your account. Your accountant confirms which applies, but the ranking of these two quotes does not change.
What the numbers do not show
- Check that quantities and specifications match. If quantities differ, compare the unit price with the Unit-price comparison tool once both quotes are on the same tax basis.
- Ask about shipping: is it included, and does it carry tax?
- Confirm that the supplier charging tax is registered and issues a tax invoice, if that matters for reclaiming it.
Once you have chosen
When you order from the supplier you picked, put the pre-tax prices and the rate on your purchase order with the Purchase-order generator, so the total is clear to both sides and matches what you compared. That way the same confusion does not return when the invoice arrives.
Common questions
What if the supplier does not say whether the price includes tax?
Ask in writing before comparing. Assuming either way can reverse the result.
Would the answer change at a different rate?
Yes. At a rate of 12 the two quotes are equal, and below that the first one is cheaper. Rerun it at the rate that really applies; the tool only calculates with what you enter.