What is the difference between Zero Rated and Exempt VAT?

Zero-rated VAT is applied to things like food, children’s clothes, and books etc. Also, if selling abroad, say to the US, your goods will be Zero-rated (although the EU will charge your customers EU VAT on importation). If you are VAT registered, you can reclaim the VAT on your overheads and costs related to those Zero-rated sales – e.g. machines to make children’s clothes.
VAT Exempt sales cover things like rent and health care insurance – and, in contrast to Zero-rated sales, you cannot claim VAT back on costs relating to those VAT Exempt sales.