Exemptions and reductions for VAT on electricity.
VAT for business consumers of energy is normally charged at 20%. However, some businesses will meet the 'Deminimis' requirements and then would be billed at 5%. This means using an average of no more than 33 kWh per day (1,000 kWh per month) for business electricity and/or less than an average of 5 therms or 145 kWh per day (150 therms or 4,397 kWh per month) for business gas.
In other cases, certain types of use also result in lower VAT costs.
The Climate Change Levy (CCL) is a Government tax, introduced in 2001, on the use of energy by businesses, agriculture and the public sector which applies to both gas and electricity. The aim of the levy is to encourage industry, commerce and the public sector to improve energy efficiency and reduce greenhouse emissions. Current Electricity CCL is 0.47p per kWh and Gas CCL 0.164p per kWh.
Broadly speaking, residential use includes fuel and power used for the purpose of heating and lighting any premises where people live. This includes:
Securing CCL-free supplies of fuel and power
In addition, certain low-volume supplies of fuel and power are automatically deemed to be for domestic purposes. In particular any supply of:
is automatically lower-rated for VAT and CCL-free.
This is an area where you may be able to save on VAT and the CCL (Climate Change Levy). If you comply with certain criteria you can minimise or elimate VAT and CCL.
Charitable non-business use
For full details of VAT on Fuel and Power you can find the government notice here: VAT Notice 701/19