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HMRC internal manual

VAT Water and Sewerage Services

Supplies made in connection with water and sewerage services: connection charges supplied with water

Where a customer contracts with a water supplier to provide mains water and that necessitates a first time connection to that water supply, the connection will be ancillary to the zero-rate supply of water providing the supplier of the water and connection are made by the same taxable person (or within the same VAT group) to the same customer.

However, if the customer is involved in a relevant industrial activity, the supply of the water and any connection will be standard rated.

First time connection of water pipe-work is standard rated if at the time of connection, no water supplier had been identified. The zero-rate only applies if in order to supply mains water for the first time, the supplier needs to carry out the connection (it is ancillary to the supply of water). However, where the connection is carried out for the first time without any reference to a water supplier, such work cannot be ancillary to the water supplier’s supply. In such cases, the water connection will be a separate taxable supply from the supply of water.