Are VAT zero-rated and exempt transactions the same thing?
No, they are similar in that the recipient of the goods or services will not pay any VAT to the supplier. However the supplier of a zero-rated item is able to recover the VAT they have incurred in creating that item eg the freehold sale of a new dwelling is zero-rated and the constructor can recover the VAT they pay out to sub-contractors. The supplier of an exempt item, for instance, a developer who has repaired an existing dwelling to sell is unable to charge VAT on the sale and is also unable to recover VAT paid out to sub-contractors, consultants and on materials and thus VAT should be brought into the equation when determining the sale price.
