1st Issue - Non Registered Supplier Answer : Yes, included.
There's really bad drafting in the 1994 VAT Act which refers to a non registered supplier being outside the scope of VAT. This is compounded by a piece of HMRC Guidance which indicates that the supplies of a Non Registered Supplier are outside the scope of VAT.
I cannot believe that government lawyers are so bad at implementing UK legislation from EU directives. Britain always wanted an unusually large registration threshold and the 1994 Act talks nonsense in this regard. Loads of scope for a re-draft then, if Brussels were to attack the threshold, which they were whining about in the 1990s.
What people miss is that the HMRC guidance I mentioned is actually only regarding the charging of VAT (well, of course you don't charge it when not registered) See the third line of 'Goods and Services Outside the Scope' near the bottom: -
BUT as I've said, people are taking it to mean that his supplies are outside the scope. They're not. Any supplies made in the course of business are inside the scope of VAT unless explicitly excluded. The thing is, don't look for UK legislation to shed any light on the subject nor HMRC guidance.
Lyndsey - before I go answering the wrong question, were you just asking what the difference was between zero and exempt for the purposes of completing Box 7 (which has been answered) or were you asking what the difference was generally (which hasn't been answered and I'm quite happy to offer answer if you do want one)?
lyndsey, i have found that so many bookkeepers have different views on this but the way i have always done it is t9 transactions are not included in the vat return whereas all other tax codes are. T9 I generally use for things that are not in the scope of vat such as stamps, postage and T0 for things like food, childrens clothing etc. Basically if its something that is in a category that in same cases attracts vat like some food is vateable and some is not, some clothing is vatable and some is not whereas things like postage is not in the scope of vat at all.
Purchases of zero rated supplies are still vatable, it's just that the vat amount happens to be zero. Exempt goods/services have no vat on them at all.
The difference has more impact on those making the supply:
Businesses/organisations making wholly zero rated supplies can still register for vat and reclaim vat on all their purchases. However, businesses/organisations making wholly exempt supplies cannot register for vat and therefore can't reclaim vat on their purchases. Those making only some exempt supplies can still register, but can't claim back the vat on purchases relating to their exempt supplies.
Stamps are exempt from vat, not out of scope: http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm#7
