Standard rate equivalent (SRE) expenditure

The equivalent amount of expenditure that would be liable for VAT at the standard rate of 20 per cent, inclusive of the amount of VAT. For example, if we have £300 of expenditure before VAT, with £100 at standard rate (20 per cent), £100 at reduced rate (five per cent) and £100 at zero rate, then the VAT inclusive amounts are £120, £105 and £100, respectively, with a total of £25 being VAT. The equivalent amount of expenditure at the standard rate that would be required to raise £25 VAT is £125. Hence, the standard rated equivalent expenditure (inclusive of VAT) is £125 + £25 = £150.