How much VAT do you need to pay on your business utilities?
Could your business be eligible for a reduced business energy VAT rate of 5%?
Do you have to pay VAT on your water bill?
Electricity and Gas
VAT for your business energy is charged at the current standard rate of 20%. However, you may be eligible for VAT reductions on your business energy if:
- Your business meets the ‘de-minimis’ requirements
- Your electricity or gas supply is used wholly or partly for domestic or charitable non-business use, or ‘qualifying use’
De Minimis Customers
- If your average daily consumption of energy is lower than the ‘de-minimis’ threshold, then you are eligible to be billed at the reduced VAT rate of 5%. Your average daily usage must be no more than:
- 33kWh per day or 1,000 kWh per month of business electricity
- 145kWh per day or 4,397 kWh per month of business gas
- You’ll automatically be billed at the reduced VAT rate if your usage is below the threshold
Qualifying Use Customers
- If your property consumes energy for domestic or charity use as well as commercial, usage for this part of the supply will qualify for the reduced rate of VAT (5%).
- You will need to complete a VAT certificate for this reduced rate to be applied. This certificate is included within your welcome email.
Until your completed VAT certificate is received, we’re required by HMRC to charge you the standard VAT rate. Please make sure you provide your completed VAT certificate as quickly as possible before your first bill. Make sure you keep us informed of any changes in your circumstances, which might change your VAT rate.
To make sure that we charge you the correct rate of VAT for your business water, you’ll need to complete a Water VAT Declaration Form.
VAT for your business water supply is payable by some non-household customers and usually applies to businesses involved in manufacturing, engineering and construction processes. These are businesses that fall into divisions 1-5 of the 1980 edition of the Standard Industry Classifications (SIC).
Our wastewater charges are normally Zero Rated. VAT may apply to our charges for making new water and sewer connections, but this depends on the type of building to be connected.
To make sure that we charge you the correct rate of VAT for your business water you’ll need to complete a Water VAT Declaration Form.
We’ll send one with your welcome email.
We’re required by HMRC to charge VAT by default on your water services until we receive your completed VAT declaration form so please make sure you get this back to us within 14 days.