The Difference Between Exempt And Zero-Rated VAT

If you sell zero-rated goods or services they count as taxable supplies, but you don't add any VAT to your selling price because the VAT rate is 0 per cent.

If you sell goods or services that are exempt, you don't charge any VAT and they're not taxable supplies. This means that you won't normally be able to reclaim any of the VAT on your expenses.

Generally you can't register for VAT or reclaim the VAT on your purchases if you sell only exempt goods or services. If you sell some exempt goods or services you may not be able to reclaim the VAT on all of your purchases.

If you buy and sell only - or mainly - zero-rated goods or services you can apply to HMRC to be exempt from registering for VAT. This could make sense if you pay little or no VAT on your purchases.

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