by As a business owner in the United Kingdom, you may be wondering if you have to pay VAT on your water rates. The answer is yes; in most cases, you will have to pay VAT on your business water rates.
However, there are a few exceptions to this rule. In this article, we will look at what those exceptions are and if you are eligible for a tax-exempt exemption. Let’s get right into it!
The logic behind VAT on business water rates
The UK has a value-added tax (VAT) on business water rates of 20 percent. This means that when you buy water from your supplier, you’re paying 20 percent more than the cost of the water itself.
The rationale behind this is that businesses use more water than domestic customers and so should contribute more to the infrastructure costs associated with providing water.
However, many businesses feel that they are being unfairly penalized by this system. After all, businesses already pay business rates, which are based on the value of their property. So why should they also have to pay VAT on their water?
The answer lies in how business rates are calculated. Business rates are calculated based on the value of your property, but they don’t take into account the value of your business. This means that businesses with high turnover but low-profit margins can end up paying more in business rates than they can afford.
The government has said that it is looking at ways to reform the business rates system, but in the meantime, businesses will continue to pay VAT on their water rates.
How can you reduce the impact of VAT?
If you’re a business owner, there are a few things you can do to minimize the impact of VAT on your water bills.
First, make sure you’re on the right tariff. There are a number of different tariffs available, and some may be better suited to your business than others.
Second, consider using a water management company. These companies can help you to reduce your water consumption, which can lead to significant savings on your water bills.
Third, make sure you claim back any VAT you’re entitled to. If you make any purchases that are eligible for VAT, you can claim back the VAT you’ve paid. This includes things like machinery and equipment.
Finally, don’t forget that you can offset your VAT payments against your corporation tax bill. This means that you won’t necessarily have to pay any additional tax on your water bills.
Conclusion
It is important to note that the rules surrounding VAT can be complex. As a business owner, it’s important to be aware of the implications of VAT on your water bills.
By taking a few simple steps, you can minimize the impact of VAT and keep your costs down. If you are unsure about whether or not you need to pay VAT on your water rates, it is best to speak to an accountant or tax advisor.
