Exempt supply (UK VAT)
An exempt supply does not bear output VAT and is excluded from VAT taxable turnover. Input VAT attributable to exempt activities is generally not recoverable, subject to applicable rules and exceptions. Exempt supplies differ from zero-rated taxable supplies and from supplies outside the scope of VAT. Classify the transaction under the law and assessment period; partial-exemption calculations are excluded from the cited TX syllabus.
Worked example
A business makes a supply that meets the conditions for a VAT exemption. It does not charge output VAT on that supply and considers the applicable input-recovery restrictions.
Common mistake
Assuming exempt and zero-rated mean the same thing or that all VAT incurred on exempt activities is automatically recoverable.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |