What is the difference between zero-rated transactions and exempt transactions?
If an item is zero rated, it means that it is a potentially vatable transaction but in this instance no VAT is being charged, for example if you are purchasing from someone who is not VAT registered, or if you are purchasing children’s clothes. Generally clothes are vatable, but no VAT is charged on children’s clothes therefore they are zero-rated. Exempt is when the goods do not attract VAT, e.g. newspapers.
