VAT on water charges?

lovemoneysaving

I'm a new landlord of a residential property, I've received a VAT questionnaire from Severn Trent Water, it asks me to tick what my main business activity includes (e.g. engineering, construction, landlord etc). I've ticked 'landlord'.

I understand VAT will be applied to water charges when resident's business activity includes construction, engineering, etc.

This property will only be used as a residential (not business) property. But I don't know if I (when the property is empty) or my tenants (when it's occupied) will need to pay VAT on water bills.

Looking forward to hearing your views. Sorry for being so thick. Thanks a lot!

Werdnal

Maybe I am being thick here too, but in 11 years of being a private LL I have never received a Vat questionnaire. Is this something I have missed? Should I be registered for VAT? I thought only companies and other organisations should be VAT registered, and even then, you have to achieve a certain turnover a year to qualify?

How many properties have you got?

If I have unnecessarily been paying VAT on void utilities and other expenses over the last 11 years, I think I should have known about it by now!

lovemoneysaving

Werdnal wrote: »

Maybe I am being thick here too, but in 11 years of being a private LL I have never received a Vat questionnaire.

I've no idea how I get sent this VAT questionnaire. I have only this 1 property to let. It was managed by an estate agent before purchase, I could only guess that the estate agent informed the water company the change of owner & also we'll letting this property out...

DVardysShadow

Are you filling it in just because they sent it to you, or is there a good reason?

Werdnal

DVardysShadow wrote: »

Are you filling it in just because they sent it to you, or is there a good reason?

I agree, was this something you applied for yourself? I have done a very quick google search, and VAT registration only usually applies to portfolio landlords - I read the figure of a £70K annual turnover being quoted on one site.

Before you submit the form and open a can of worms for yourself, you might want to research it a bit more. Speak to your local HMRC office and find out if its relevant to single property LL, as the trouble with a lot of these government agencies is once you get on their list for something, you are stuck there like s*!t to a blanket and may find it brings other responsibilities that you do not need/want!

lovemoneysaving

DVardysShadow wrote: »

Are you filling it in just because they sent it to you, or is there a good reason?

I'll have to fill it in, otherwise VAT will be added to all charges!!

This is what it says on the letter:

"In order to comply with VAT legislation, it is necessary to establish your Standard Industrial Classification code. This will determine whether Severn Trent is required to include VAT on charges billed for the supply of water to your property.

Until such time as we have received this information Severn Trent is required by law to add VAT to all charges raised for the supply of water.

Severn Trent Water Ltd is required to apply VAT to charges for water supplied to customers whose main business activity is defined within divisions 1-5 of the Standard Industrial Classification (SIC) List 1980. These activities include construction, engineering, manufacturing, mining, quarrying, fuel production, energy and water supply industries. Charges for water supplied to customers whose main business activity does not fall within these categories are zero rated for VAT purposes."

The VAT questionnaire says:

"Please tick the relevant box if your main business activity falls within one of the sectors detailed below:
- Agriculture Forestry & Fishing
- Energy and Water Supply Industries
- etc ( it's a long list, I won't list everything here) (but the very last one is:)
- Landlord/Managing agents

Werdnal

If its the letting property there is no business category attached to it, as it is a normal domestic connection, regardless of whether you let, rent or own the property. You will only be paying the charges during voids, so they cannot put VAT on all your supply, as it is not yours when the tenant is paying.

As I said before, speak to your local HMRC office, or the water company, but I do not think the vat registration/exemption rules apply to a "single property" LL or any residential property you let, as you are not a registered company.

The following is an extract from Severn Trent's website:

Household customers don't usually pay VAT. However, if a company whose main business activity attracts VAT and is responsible for water charges for a residential property, we are required to add VAT to our charges, unless the Company lets or intends to let the property for rent.

You are not a company and there is no company/industrial/non-domestic activity attached to the property.

pararct

Apart from widescale heavy use in industry then as far as I know water is zero rated. I know the Government want to tax everything and anything they can get away with but along with food which is also zero rated water is an essential of life. It is probably the definition of 'Industrial Customer' that you need to investigate.

As for other utilities in domestic use this is charged at a VAT rate of 5% See here for the full list.

When you see that some goods on that list such as mobility scooters for disabled persons and maternity pads for new mothers attract VAT you will be as disgusted with the tax regime as I am.

jjlandlord

I think you should only reply that the property is "entirely domestic" (saw that on the VAT questionnaire from another water company), as they send these questionnaires only to businesses.
If this is not possible on the form, then you should contact them.

lovemoneysaving

Thanks for all the help & advice on here!

martindow

pararct wrote: »

When you see that some goods on that list such as mobility scooters for disabled persons and maternity pads for new mothers attract VAT you will be as disgusted with the tax regime as I am.

In practice you usually don't pay VAT. For elderly or disabled people you sign a form saying that there is a medical reason for buying them and VAT is waived. Otherwise I suppose golf buggies would be sold as mobility scooters to reduce their retail price.

Not sure about maternity pads but incontinence pads are supplied with no VAT.

Just found the HMRC reference here

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageImport_ShowContent&id=HMCE_CL_000184&propertyType=document

I suppose maternity pads were dependant on whether pregnancy is considered a disability!