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Definition
Zero-rated supplies are taxable for VAT but at a rate of 0% — you charge customers no VAT, yet you can still reclaim the input VAT on your costs. Most food, books, children's clothes and exports are zero-rated.
In plain terms
The customer pays no VAT, but crucially you keep the right to reclaim VAT on what you buy. That combination makes zero-rating far more favourable than exemption.
Why it matters for your company
A wholly zero-rated business charges no output VAT but reclaims all input VAT, usually sitting in a permanent refund position — a genuine cash-flow advantage. Confusing zero-rated with exempt is a costly, common error.
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