If your business is linked to the water mains, you’re likely receiving routine water invoices. However, have you ever contemplated whether Value Added Tax (VAT) is applied to your commercial water bills?
This article explains VAT and how it is included in water and wastewater bills for businesses. It also guides ensuring that you pay the correct VAT rate.
VAT is a tax on a product at each step of the supply chain where value is added.
Many individuals are acquainted with VAT being applied at the standard rate of 20% to the majority of products or services they purchase.
A business’s VAT to HMRC (Her Majesty’s Revenue and Customs) is calculated by subtracting the VAT they have incurred in all their purchases from the VAT they have collected on their sales.
To find out more about the VAT on your business energy bills, check out our guide.
The VAT that is typically added to commercial water bills is primarily relevant to engineering, manufacturing, and construction enterprises.
These businesses consider water as a direct input in their production processes, which aligns with the VAT’s definition of taxable items.
Businesses subject to paying VAT on their water bills typically belong to the 1-5 divisions of Standard Industry Classifications. The main industries in this category include:
SIC codes are a five-digit standard industry classification name system used worldwide to categorize various types of businesses. Government agencies utilize this system to classify industry sectors.
The “nature of business” section of public company records at Companies House incorporates the SIC code along with its explanation.
Businesses that fall under the subsequent categories are required to pay VAT on their business water bill:
The remaining SIC categories that are not required to pay VAT include:
There are 600 SIC classifications available to assist you in determining the most suitable code for your business.
Companies House offers a user-friendly directory of SIC codes that simplifies the process of finding the appropriate code.
Even if your company is dormant (99999) or not actively trading (74990), there is a relevant SIC code available for selection.
If you believe that VAT is not being handled correctly, we advise reaching out to your current business water provider and explaining your business type along with the most appropriate SIC code.
Your business water supplier can then evaluate unnecessary water consumption and address this matter on your behalf.
The VAT rate for all the industrial companies mentioned earlier is fixed at 20%, which is applied at the standard rate.
Businesses subject to paying VAT on their commercial water bills have the opportunity to reclaim the VAT charged by their commercial water services supplier as input VAT when filing their regular VAT returns.
Your business won’t incur VAT charges on your water bills or sewerage services unless it falls within the industrial business sector, as elaborated upon earlier in this explanation.
For instance, if your business operates in engineering, manufacturing, or construction, you will be required to pay VAT.
If you suspect that your supplier is incorrectly applying your business to pay VAT charges, we recommend getting in touch with your supplier’s customer service department for resolution.
Navigating business water bills can be challenging. That’s why, at Business Energy Comparison, we provide a complimentary bill validation service.
We thoroughly examine your most recent water invoices and recompute your costs in alignment with your region’s wholesale scheme. Our team of experts will identify any inconsistencies in your water meter billing, highlight potential opportunities for historical rebates, and offer practical recommendations to reduce your water supply expenses.
At Business Energy Comparison, we specialize in simplifying the process of transitioning your business water billing.
The initial phase of this process involves choosing a business water supplier, allowing you to assess your current water rates in comparison to those offered by alternative providers.
Benefits of switching your business water supplier include:
To start your business water comparison, get in touch today.
If you’re looking to save money on your current business energy costs, start comparing business energy suppliers today. Our services cover both gas and electricity supply.
Depending on the provider, you have the option to start the transition process up to 12 months before the expiration of your energy agreement.
To evaluate business electricity rates, use our postcode search tool and start the comparison procedure. Follow the straightforward steps outlined above to quickly compare business electricity rates.
Comparing business gas rates is a straightforward process. Use our postcode finder to initiate the switch today.
Switch your business water supplier today. Get started by entering your postcode, and start switching business water suppliers, within minutes.
No, VAT is only charged on fresh water.
For most businesses, business water rates are classified as a ‘zero-rated supply,’ implying that VAT is not applied to the water supply. However, it remains subject to taxation through other means.
To clarify, being VAT-exempt means that a service or product is entirely free from taxation.
For businesses in the industrial sector, business water rates may be categorized as a ‘standard-rated supply of wastewater services.’
In Wales, VAT rules align with those in the rest of the UK. Typically, businesses are not subject to pay VAT unless they operate in the industrial sector.
When it comes to water supplies for residential properties, VAT is not applied to the bill.
The residential water industry operates differently from the business water market. Households receive bills from their local water company without any VAT charges for the water they consume.
If you suspect that you’re facing incorrect charges, the most effective course of action is to identify your business’s primary SIC code and inform us. Please share as much information as possible through our general enquiry form, and we will promptly respond to your inquiry.
Business Energy Comparison
Corby Innovation Hub,
Bangrave Road
Corby, NN17 1NN
0800 007 4001
Trading name of Utility Bidder
