Zero-rate ― water and sewage services

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Zero-rate ― water and sewage services
  • Water
  • Sewage
  • Supplies of steam and hot water
  • Supplies connected with water and sewage services
  • Water meters

This guidance note provides an overview of the VAT treatment of water and sewage services.

VATA 1994, Schedule 8, Group 2 (as amended by SI 1996/1661); VWASS1000 ; De Voil Indirect Tax Service V4.271 (subscription sensitive)

The supply of water that will be used in connection with industrial activities will be liable to VAT at the standard-rate. The supplier is responsible for determining who is using the water and the correct VAT treatment of the supply made.

An industrial activity is one of the activities described in Divisions 1 – 5 of the 1980 edition of the Standard Industrial Classification and the five divisions are:

  • energy and water supply industries
  • extraction of minerals and ores other than fuels; manufacture of metal mineral products and chemicals
  • metal goods, engineering and vehicle industries
  • other manufacturing industries
  • construction
VAT treatment of non-industrial activities

The following table provides an overview of the VAT treatment of water that has been supplied for non-industrial activities:

ActivityVAT treatment
Supplies of water and ice excluding heated water, distilled water, or mineral waters, etczero-rated
Supplies of hot water or steam

More on Zero-rated supplies: