VAT On Business Water Bills

As a business, the amount of VAT that you’ll need to pay on your water bills is based on your specific Standard Industrial Classification (SIC) code. This code is how government organisations such as Companies House and the Office for National Statistics identify and categorise your business operations.

Typically, businesses only have one SIC code but you may find you need to have more than one, depending on how your company functions and how complex it is.

To gain a better idea of whether or not you should be paying VAT on water bills is to know what your SIC code is and which category you’re classified under. Some SIC codes do come with VAT exemptions, so it’s certainly worth investigating to see if you are eligible in this regard.

What is the VAT rate on business water bills?

The VAT you have to pay is always set at the standard 20% rate on clean water, not wastewater. If your business’s SIC code is 01,02, 03, 04 or 05, then you will need to pay VAT on commercial water supply.

Water suppliers are legally obliged to ensure that they’re charging the correct VAT on all water services that they provide. If they don’t have your correct SIC code, they will then charge VAT by default in order to remain compliant.

As such, it’s vital that you let your supplier know what your code is as soon as you can so you know you’re not being under or over-charged.

Which businesses are exempt from paying VAT on water bills?

Businesses with 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) and 10 (diplomatic representation and international organisations) are all exempt from paying commercial VAT on water bills.

Businesses with SIC codes 01 (energy and water supply industries), 02 (mineral/ore extraction other than fuels and chemical/mineral product/metal manufacturing), 03 metal goods, engineering and vehicle industries), 04 (other manufacturing industries) and 05 (construction) will have to pay VAT on commercial water bills.

How do I find out what my VAT on water rates is?

Because the English retail water market is still relatively new, it can be a tricky landscape for companies, both large and small, to navigate. This often means that you end up being overcharged on your bills – but the SwiftSwitch team can help you make sure that you’re paying the correct business water rates VAT by carrying out water bill validation.

This involves conducting a full review of your bills over time so that we can recalculate your charges based on your actual usage and consumption.

You may also find that, after this review has been completed, you are able to get a better deal with a different supplier, which is also something we can help you with. If you’d like to find out more, get in touch with us today.