Water Rates

This Overheads code records the cost of water rates incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Office/retail — non-industrial use

An office or retail business's water and sewerage supply for ordinary washroom and kitchen use qualifies as non-industrial, which HMRC zero-rates for VAT purposes — a £480 water bill is a debit of £480 to 7102 (Water Rates) with nothing posted to 2201, since 0% VAT still means no VAT to reclaim even though the supply is technically within the scope of VAT.

Manufacturing — industrial use

A manufacturing business using water directly in a production process, rather than just washrooms and kitchens, falls under HMRC's definition of industrial use, so the supply is standard-rated at 20% rather than zero-rated. A £2,400 bill (£2,000 net) is a debit of £2,000 to 7102, a debit of £400 to 2201, and a credit of £2,400 to 2100 — a materially different VAT treatment for what looks like the same type of utility bill, driven by how the water is actually used rather than what industry the business is loosely described as being in.

Commonly confused with

Because code 7103 (General Rates) sits right next to this one in Overheads, it's a common mis-posting target. Code 7102 is specifically for water rates, while 7103 covers general rates — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Water Rates won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads