I agree with Steve. Zero rated should be included in your VAT accounts and exempt should not.
quoting HMRC:
Exempt supplies are not taxable for VAT. So you do not include sales of exempt goods or services in your taxable turnover for VAT purposes. If you buy exempt items, there is no VAT to reclaim.
This is different to zero-rated supplies. In both cases VAT is not added to the selling price, but zero-rated goods or services are taxable for VAT - at 0 per cent.
Zero-rated and exempt supplies should be on the VAT return. The only items not appearing are the "outside the scope of VAT". In SAGE that means T0 and T2 (zero-rated and exempt) appear on the VAT return, whereas T9 (outside scope) do not.
T2 are items such as postage and insurance.
T9 are journals, wages, bank charges, etc.
The difference being that zero rated and exempt can still be VAT'd if the government wants whereas outside scope allegedly can't.
There are some goods and services that are exempt from VAT. Exempt goods and services are not taxable for VAT, so if you supply them, then:
you don't charge any VAT on them you don't include them in your VAT accounts you don't put them on your VAT Return you can't normally claim back the VAT on related purchases
Put in box 6 your total sales/outputs excluding any VAT. Include:
* standard-rated supplies including road fuel scale charges (see Notice 700/64 Motoring expenses) * supplies to VAT registered traders in EC Member States; supplies to non-VAT registered or private individuals in EC Member States (distance sales) * zero-rated supplies, including export supplies * exempt supplies * any other business income * reverse charge transactions * purchases under the special accounting scheme for gold * supplies which are outside the scope of UK VAT under the Notice 741 Place of supply of services * deposits for which an invoice had been issued * own goods transferred to other EC Member States and * supplies to customers in EC Member States on a sale or return basis.
5.7 Box 7
Put in box 7 your total purchases/inputs excluding any VAT. Include:
imports
acquisitions from EC Member States
reverse charge transactions and
special accounting scheme for gold transactions.
If you buy goods under the Margin Schemes, include the full purchase amount.
If you enter anything in box 9, also include it in the box 7 total.
5.8 Things to remember when completing boxes 6 and 7
Leave out:
VAT itself
wages and salaries
PAYE and National Insurance contributions
money put into and taken out of the business by you
loans, dividends, and gifts of money
insurance claims
Stock Exchange dealings (unless you are a financial institution)
MOT certificates
motor vehicle licence duty
Local Authority rates and
income which is outside the scope of VAT because it is not consideration for a supply.
5.9.2 Box 9
Enter the total value of all acquisitions of goods from other EC Member States, including any goods acquired by you from another member state, even if no actual purchase is involved or the person invoiced is located outside the EC.
If you enter anything in box 9, include the amount in the box 7 total."
