What's the difference between zero-rated and exempt for VAT purposes?

Zero-rated sales are still VAT-taxable supplies, just charged at 0%, so they count towards your taxable turnover and you can normally reclaim VAT on related costs. Exempt sales sit outside the VAT system altogether, and if you make exempt supplies you may not be able to reclaim all the VAT on your related purchases (this is called partial exemption). This distinction can genuinely affect your bottom line, so if you sell a mix of exempt and taxable goods or services, it's worth getting an accountant to check your VAT recovery position.