VAT must be charged at the standard rate of 20% on the supply of water to relevant industrial users. If you are a business customer using water for a relevant industrial activity that falls within Divisions 1 to 5 of the 1980 Standard Industrial Classification (SIC) list, VAT will need to be added to your water bill. VAT is not charged on water used by domestic and non-industrial businesses (being a zero-rate supply).
We've put together the below list of frequently asked questions we receive from our customers. If you still can’t find the answer you are looking for. You can contact us using the details at the bottom of this page.
It is the primary responsibility of the customer to correctly determine and declare the nature of their activity. However, we would like to work with you to ensure the correct VAT treatment is applied to avoid the risk of potential VAT penalties. If you have any questions on VAT or would like to let us know that you think you are currently being treated incorrectly for VAT please use the contact form to let us know.
VAT is Value Added Tax charged on supplies of goods or services supplied in the UK. The standard rate of VAT is currently 20%, but some supplies have a reduced rate or zero rate or are exempt from the tax.
VAT is not charged on the supply of water to domestic and non-industrial business customers, such supplies being ‘zero rated’.
However, by law VAT must be charged at the standard rate on the supply of water to relevant industrial business users. Accordingly, if you are a business customer using water for a Relevant Industrial Activity VAT will need to be added to your water bill.
The mains disposal and treatment of sewage and wastewater is generally a zero-rated supply to all customers and so for relevant industrial business users VAT may only be charged on the water supply element your bill.
Relevant Industrial Activities are defined as those falling within Divisions 1 to 5 of the 1980 Standard Industrial Classification (SIC) list, being:
|1||Energy and water supply industries.|
|2||Extraction of minerals and ores other than fuels; manufacture of metal, mineral products and chemicals.|
|3||Metal goods, engineering and vehicle industries.|
|4||Other manufacturing industries.|
Broadly, these activities include mining, quarrying, chemical, pharmaceutical, manufacturing, engineering and construction industries which must pay VAT on their water. If your predominant business activity is cover by Divisions 0 or 6 to 9 of the 1980 SIC codes, you don’t have to pay VAT on water supplied to you.
More detailed information on industrial activity and when VAT must be charged is available in the HMRC VAT water and sewerage services manual. Including a conversion table between 1980 SIC and current 2007 SIC codes.
Standard Industry Classification (SIC) codes are used by the Office of National Statistics (ONS) to describe the main business activity of your company. The SIC list is divided into Divisions, with each Division having classes and sub-classes to further define an activity. For the water industry, the VAT rules refer to the 1980 list, although the SIC list has subsequently been updated in 1992, 1997 and 2007. The ONS website has detailed guides for each of the SIC lists.
All companies that file an annual return with Companies House are required to report SIC codes for their activity, from a condensed list. Up to four codes can be reported by a business that has several activities. It is the primary or predominant SIC code activity of a customer that determines if VAT is payable on all water supplied to that business in respect of all its activities (irrespective of what the water is used for).
If you are an unincorporated business you may not have had to determine your primary SIC code before and you should use the 1980 SIC code list and other information available from the Office of National Statistics (ONS) to do so.
VAT must be charged on water supplied to you if your primary industrial activity is classified in Divisions 1 to 5 of the 1980 edition of the SIC code list.
We require business customers to provide and confirm their primary SIC code when opening an account with us. Normally this is by way of a customer declaration that their main activity does not fall within Divisions 1 to 5 of the list and so VAT zero rating can be applied to their bills.
If we don’t have your SIC code and cannot clearly determine what your business does from other sources, we will contact you to obtain further information. If you do not provide a suitable SIC code declaration, we will apply VAT to your clean water bills.
Please consider the nature of your main business activity, in the context of the 1980 SIC list. If you consider VAT is being incorrectly charged to you as you are not engaged in a Relevant Industrial Activity or alternatively VAT is not being charged but should be as you are engaged such an activity, please contact us below.