The question seems simple doesn’t it, yet we often see organisations that are not paying the right amount of Value Added Tax (VAT). So, to help you understand the key factors involved to answer this question, let’s take a look at the detail.

VAT is a levy on the sale of certain goods or services by UK businesses and is currently set at 20%. Businesses that undertake industrial activities that fall under division 1-5 under the 1980 Standard Industrial Classification (SIC) are liable to pay VAT on their water supply. In brief, those Divisions are:

Division Title
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.
5 Construction.

All other non-industrial businesses are exempt from paying VAT on their water supply. It is important that you inform your water retailer of your correct business classification (SIC code) so that they can ensure you pay the correct VAT on your water supply.

Many businesses are not VAT registered such as care homes and charitable organisations and the effects of overpaying VAT on their water supply is an added cost burden. So please check your bills and ensure that you are paying the right VAT on your bills.

Reference

GOV UK