What is the difference between zero-rated and vat exempt?
The zero-rate of VAT remains a positive rate of tax and includes items such as food, books and public transport. Whilst no VAT is charged on providing goods and services taxable at the zero-rate of VAT you are still able to deduct VAT on costs and expenses you incur in making zero-rated supplies. If you make only exempt supplies for example supplying insurance you cannot recover any VAT on costs and expenses you incur in making these supplies and will not be able to be VAT registered. If you make both taxable and exempt supplies you are regarded as being partially exempt for VAT purposes. This can become more complicated to understand.
