2 min read
Definition
An exempt supply is a sale that falls outside VAT altogether — no VAT is charged, and the business generally cannot reclaim the input VAT on costs relating to it. Examples include insurance, some property and financial services.
In plain terms
Exempt is not the same as zero-rated. Both mean the customer pays no VAT, but exempt supplies block you from reclaiming related VAT — so they can leave real, unrecoverable cost in the business.
Why it matters for your company
Making exempt supplies can pull a business into partial exemption, restricting VAT recovery. Adding an exempt income stream — like letting a property — can cost more in lost recovery than the income earns.
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