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VAT on business water bills

Are you paying VAT on you business water bills?

Some businesses must pay VAT on water charges, calculated at 20%. This depends on your business activities as recorded by your Standard Industrial Classification (SIC) code.

VAT (Value Added Tax) is normally only payable on your water bill if your business is involved in one of the following industries:

 
If you are not in one of these industries and are paying VAT, please ensure we have your up to date SIC code.

Incorrectly paying VAT on your water bill?

If you think your business is being wrongly charged VAT on your water bills, let us know your Standard Industrial Classification (SIC) code by completing the SIC Code Form on your online account, please ensure you are logged in. Alternatively you can download the SIC form and return it to us.
Complete SIC Form Online
Downloadable SIC Form

VAT on your supply

Whether you pay VAT on water bills for business depends on your Standard Industrial Classification (SIC) code. VAT will be charged on your water supply if your main business activity falls into one of the following five divisions:

  • Division 1 – Energy and water supply industries
  • Division 2 – Extraction of minerals and ores other than fuels; manufacture of metals, mineral products and chemicals.
  • Division 3 – Metal goods, engineering and vehicle industries. Manufacture of metal goods not elsewhere specified.
  • Division 4 – Other manufacturing industries
  • Division 5 – Construction

VAT exemptions

You will not pay VAT on your water supply if your main business activity falls into one of the following five divisions:

  • Division 0 – Agriculture, forestry and fishing
  • Division 6 – Distribution, hotels catering and repairs
  • Division 7 – Transport and communication
  • Division 8 – Banking, finance, insurance, business services and leasing
  • Division 9 – Other services (including education and other public services)
  • Division 000 – Diplomatic representation, international organisation.

SIC codes are used by government bodies such as Companies House and the Office for National Statistics to systematically identify and categorise the principal business activities of limited

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Castle Water ensures that you are correctly charged VAT on water 

Although for most businesses the Standard Industrial Classification activity codes were updated to a 5-digit number in 2007, HMRC has chosen the 1980 3-digit Standard Industrial Classification activity codes as a method of identifying which groups of customers must be charged VAT on their water services.

HM Revenue and Customs requires Castle Water to ensure that we are correctly charging VAT on water services. If you do not inform us of your SIC code, we are required by HMRC to charge VAT by default on your water services.

Your SIC code is used to see if we must charge VAT on the water we supply to you, however, different rules apply to our other charges. Our wastewater charges are normally ‘Zero Rated’, but VAT may be applied to our charges for making new water and sewer connections, but this depends on the type of building that we are supplying.

If you have several sites, the SIC code for your largest business activity must be applied to all of your sites, including domestic properties. Please do not change the SIC code for the business activity conducted at each site.

If you think your business is being wrongly charged VAT on your water bills, you need to tell your water supplier your SIC code. Not impressed with your current water supplier? Many people don’t know how easy it is to switch – which is always an option. In any case, make sure you are paying the right amount of VAT.