Zero-Rated Vat Items

Difference Between Zero-Rated Vat Items and Exempt Supplies

If your company is bringing out zero rated VAT items, why not enroll for VAT and claim back the charge you presently pay on outgoings and costs? The fundamental rule for VAT is that everything is subject to VAT at the basic and minimum rate unless the law makes a special case for it. The list of zero rated VAT items is contained in Plan 8 of the VAT Act 1994.

Read this article completely to explore the difference between zero rated VAT items and exempt items. 

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VAT Rates

Your products and appliances are charged with three distinctive categories of VAT rates, which are taking after:

1. Standard rate 

The standard rate of VAT within the UK is currently 20%, and this can be the rate charged on most buys. 


2, Reduced Rate 

The reduced VAT rate within the UK is 5%, which is charged on mostly energy-saving measures, sanitary items, and children’s car seats, etc.


3. Zero Rate 

It is a rate of tax that is charged 0% on items. Zero rating applies to most fundamental edibles, water, and sewage facilities; a few building works, books and daily papers, trades, transport facilities, e.g. buses, trains and airplanes, modern apartment convenience, a few contributions to charities and children’s clothing. Although, there’s no VAT on zero rated items. So, companies that produce zero rated VAT items can register for VAT and recover VAT on their expenses.


4. Exempt Items 

Exempt items are not a rate of tax and are outside the VAT administration. Therefore, you can not register for VAT, and you can not claim back any VAT on the expenses incurred in producing exempt items.

In the event that you produce both taxable and exempt items, you’ll enlist for VAT, but you may not be able to claim back all of the VAT on your expenses.

Some of the exempt items listed in Schedule 9 of the VAT Act 1994 are – Charity fundraising events & cultural activities, finance, postal services, education, health, betting, insurance, supplies of primary land and non-primary residential properties.

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Zero Rates Vs Exempt Items

Understand the difference between zero rate & exempt items with the following infographics. 

Zero VAT vs Exempt items



If you are running a business, you should be aware of the difference between zero rated VAT items & exempt supplies and their effects of recovering the VAT on all your expenses.

On the off chance that you’re planning to make exempt supplies for your business, you’ll have to figure within the extra costs of the irretrievable VAT before you begin, or else you may be in a costly surprise.

If your business deals with both exempt and taxable supplies, you’ll be enlisted for VAT, but you may not be able to claim back all of the VAT on your expenses. Moreover, to see how much VAT can be recovered, you’ll need to calculate every month.

Feel free to contact our Chartered Accountants in London to resolve your bookkeeping and VAT issues.

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