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HMRC internal manual

VAT Water and Sewerage Services

Supplies of water: exception to the mixed use - the ‘predominant activity’ test

There is one exception to this general approach outlined in VWASS2600.


  • a relevant industrial customer has two or more business activities; and
  • one of those activities is non-industrial and exempt for UK VAT purposes; and
  • that exempt activity is not the predominant activity; and
  • the water supplied to the exempt business activity is separately identified and separately invoiced;

the water so invoiced may be treated as separately supplied and zero-rated.

This avoids putting a customer with separate non-industrial, VAT-exempt, activities and industrial activities at a disadvantage, compared to a customer who has only non-industrial exempt activities.