As a business, it’s possible that you will need to pay VAT on water bills, although the amount you have to pay will be based on your Standard Industrial Classification (SIC) code, which is how your operations are identified and categorised by government bodies like Companies House and the Office for National Statistics.
Businesses usually only have one of these codes but if your organisation is completely complicated or functions in a certain way, it’s possible that you may need to have more than one.
Some SIC codes come with VAT exemptions, so it’s certainly worth looking into it and finding out what category you’re classified under to see if you have to pay VAT at all.
What VAT do businesses have to pay on water bills?
If you do have to pay VAT on water bills as a business, it’s always set at the standard 20 per cent rate on clean water, not wastewater. You will have to pay tax on commercial water supplies if your SIC code is 01, 02, 03, 04 or 05.
It’s a legal requirement for water suppliers to make sure the correct VAT is being charged on all water services provided. If they don’t have the correct SIC code for your organisation, VAT will be charged by default so they remain compliant. As such, it’s essential that you provide your supplier with the code information so you know you’re being charged correctly.
Which businesses are exempt from water bill VAT?
To be exempt from paying commercial VAT on water bills, you will need to have one of the following SIC codes:
- 05 (agriculture, forestry and fishing)
- 06 (distribution, hotels, catering and repairs)
- 07 (transport and communication)
- 08 (banking, finance, insurance, business services and leasing)
- 09 (other services, such as education and public services)
- 10 (diplomatic representation and international organisations)
Businesses with the following SIC codes will have to pay VAT on commercial water bills:
- 01 (energy and water supply industries)
- 02 (mineral/ore extraction other than fuels and mineral product/chemical/metal manufacturing)
- 03 (metal goods, engineering and vehicle industries)
- 04 (other manufacturing industries)
- 05 (construction)
How do you find out what your business water VAT is?
It can be overwhelming and difficult for businesses to navigate their way through the English water retail market because it’s relatively new and there are newcomers entering the market all the time. This means you may find that you’re being overcharged on bills and paying more VAT than you need to.
By getting in touch with the Switch Supplier team, however, you can make sure that you’re paying the right amount of VAT by making use of our water bill validation service.
We can carry out a full historical review of your water bills so that charges can be recalculated based on your actual usage and consumption.
It’s also possible that, after the review has been conducted, that you’re able to get a better deal and better rates with a new supplier – something else we can certainly help you with. If you’d like to find out more, give us a call today.
