All 25 VAT Records questions
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When must a business register for VAT? How is VAT recorded on a sales invoice in the books? How is VAT recorded on a purchase invoice in the books? How long must VAT records be retained and in what form? What information must a valid VAT invoice contain? What is the tax point (time of supply) and why does it matter? How do you complete and reconcile a VAT return? How is the VAT liability settled and recorded when paid? What is the VAT cash accounting scheme? What is the VAT flat rate scheme?
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Bookkeeping › VAT Records

What is the difference between zero-rated and exempt supplies?

Intermediate

Answer

Zero-rated supplies are taxable at 0%—they count as taxable, so a business making them can still reclaim input VAT on related costs. Exempt supplies are outside the scope of VAT—no output VAT is charged and input VAT on related costs generally cannot be reclaimed. This distinction is crucial for input VAT recovery and partial exemption.
Zero-rated: charge 0%, reclaim input VAT. Exempt: no VAT, cannot reclaim related input VAT.
Real-world example A zero-rated food producer reclaims input VAT, whereas an exempt insurer generally cannot.

Common follow-ups: Why does the difference matter for input VAT? | What is partial exemption?

VAT Records Sales & Purchase Ledgers VAT Records
All 25 VAT Records questions