Paying VAT on your business water bill is dependent on your Standard Industrial Classification (SIC) code. This is something you may not have come across before but it’s a code which many government bodies, including the Office for National Statistics and Companies House, use to identify and categorise a limited company’s business activities.
The SIC code reflects the activities of any given company and within this they are also grouped further into sections or individual trades. In most cases, your business will only need one SIC code, but it might need two or even more dependent on the different functions and complexities of the business. When this is the case, the company’s main SIC code is the one used to decide whether VAT is charged.
The most straightforward way to determine whether you should be paying VAT on your water bill is understanding which SIC code category your business classifies into, as some SIC codes do have VAT exemption. If your business is in categories 01, 02, 03, 04 or 05 then you’ll need to pay VAT on your commercial water supply. VAT is always charged at the standard 20% rate on clean water only, not your wastewater.
VAT SIC Codes
If your business operates in the following categories, then your commercial water bill will include VAT:
- 01 – Energy and water supply industries
- 02 – Extraction of minerals and ores other than fuels; manufacture of metals, mineral products, and chemicals
- 03 – Metal goods, engineering, and vehicle industries. Manufacture of metal goods not elsewhere specified
- 04 – Other manufacturing industries
- 05 – Construction
Non-VAT SIC Codes
The remaining SIC categories are exempt from VAT payments:
- 0 – 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 (including education and other public services)
- 000 – Diplomatic representation, international organisations
Why it’s important you tell us your SIC code
By law, we’re obligated to ensure we are correctly charging VAT on all water services we provide to our customers. Without your SIC code we must charge VAT by default to comply with HMRC legislation. It’s for your benefit that you let us know your code as soon as possible so we can make sure you’re not under or overpaying for your services.
If you are unsure whether your business should be paying VAT
If you’re still unsure whether your business should be paying VAT then you can check with us, share your SIC code and we can let you know. Our team are here to help if you have any concerns over your business water rates and payable or non-payable VAT.