On 1 January 2010, standard VAT reverted back from 15% to 17.5%.

If your water is an essential part of your business's service or product, you'll be charged VAT on the water that you use. So if, for example, you make beer - you'll use a lot of water; and probably make a lot of friends. Because water is a major component of what you produce, your brewery will be charged VAT for it - though only for the water that makes up the product, not waste water, drainage or trade effluent.

If on the other hand you make sofas, you won't be charged VAT on any water you use.

Whether or not you are charged VAT on water depends on your SIC code (Standard Industry Classification). You can find out more information on SIC codes and who pays VAT on water by contacting HMRC directly.

We also charge VAT on services that require us (or Scottish Water) to perform work on your property. This includes new connections, meter installations and permanent disconnections.

Any bills we send out from 1 January 2010 onwards will, of course, use the new 17.5% VAT rate. Bills which are cancelled or refunded will use the rate which appeared on the original bill, whenever it was issued.

The change in the VAT rate only affects the VAT bit of your bills. Our charges remain the same.