Introduction: EU law
Article 110 of the Principal VAT Directive reads:
Member States which, at 1 January 1991 were granting exemptions with deductibility of the VAT paid at the proceeding stage or applying reduced rates lower than the minimum laid down in Article 99 may continue to grant those exemptions or apply those reduced rates.
The exemptions and reduced rates referred to in the first paragraph must be in accordance with Community law and must have been adopted for clearly defined social reasons and for the benefit of the final consumer.
This means that the UK is able to retain its zero rating for supplies of sewerage services and water.