Here you'll find some FAQ's with more information about VAT and Climate Change Levy (CCL). Choose from one of the options below that best suits your business and/or query.
Residential - SME Customers
I’m a residential (domestic) customer and would like to understand how VAT & CCL applies to me
Domestic use of energy qualifies for reduced rate of VAT, which is currently at 5%. CCL isn't charged on any domestic use of energy.
My energy supply is for accommodation but isn't a house/flat. Does the same rule apply?
Domestic use doesn't only cover dwellings, it also includes certain types of residential accommodation (excluding hospitals, prisons or similar institutions, hotels or similar establishments).
Examples:
Armed forces residential accommodation
Caravans
Children’s homes
Homes providing care for elderly/disabled, dependence on alcohol/drugs or people with mental disorder
Houseboats
Hospices
Monasteries, nunneries and similar religious communities
School and university residential accommodation for students or pupils
Self-catering holiday accommodation
I’m a business customer, but use small amounts energy. Do I benefit from a reduction in VAT & CCL?
Yes, businesses which use small amounts of energy are classed as “de minimis”. You'll fall under domestic use, even when the supply is to a business customer. This means that they will automatically be subject to VAT at 5% and will be excluded from CCL (no requirement to produce a certificate).
What does “de minimis” mean?
The following rules apply to each premises. Please note that we are required to take into the account of all meters on one premises when determining whether or not the de minimis rules should be applied.
Electricity | Gas |
De minimis means supplies of not more than an average rate of 33 kWh per day (1,000 kWh per month) of electricity at one premises are subject to VAT at the reduced rate. | De minimis means supplies of not more than an average rate of 5 therms or 145 kWh per day (150 therms or 4,397 kWh per month) of piped gas at one premises are subject to VAT at the reduced rate. |
The de minimis calculation is applied by looking at the average unit consumption for each individual billing period and as such, it is possible to be de minimis in some periods and not others.
The premises are used partly for residential accommodation and partly for business purposes. What rate of VAT should apply?
If the premises are used for a mixture of business purposes and residential accommodation then the VAT and CCL would be apportioned between the two (i.e. reduced rate for the portion that qualifies and standard rate for the rest). If more than 60% of the energy relates to the accommodation element then the whole supply is subject to VAT at the reduced rate (and excluded from CCL).
In order to obtain this relief, you must send a completed VAT certificate to us.
Please note - Acceptance of this form automatically results in a proportionate reduction in the CCL that you pay.
Charities
I manage the accounts for a registered charity and understand that I might be able to receive my energy bills VAT & CCL free. Is this correct?
No, but if the premises are used only for charitable non-business purposes then the reduced rate of VAT would apply. If the premises are for a mixture of business and non-business use then it is possible to split the charges between business (20% Standard Rate VAT) and non-business (5% Reduced Rate of VAT).
If more than 60% of the energy relates to the non-business element then the whole supply is subject to VAT at the reduced rate (and excluded from CCL).
In order to obtain this relief, you must send a completed VAT certificate to us.
Note, completion of this form automatically results in a proportionate reduction in the CCL that you pay.
What does “non-business” mean?
This is a complex point and detailed guidance can be found in the HMRC leaflet (Notice 701/1) that is designed for charities.There are a couple of points which are worth highlighting:
An organisation that is run on a not-for-profit basis may still be regarded as carrying on a business activity for VAT purposes.
Where a charity charges for their goods or services, HMRC see it as ‘business’ income which doesn’t qualify, i.e.
- Sale of goods (e.g. charity shops)
- Hiring out the premises (e.g. village hall)
- Charging for admission (e.g. community or leisure centre)
- Fee-paying schools
If the charity makes no charge at all the activity is unlikely to be considered business.
Can you confirm whether or not my charity is making non-business supplies?
Unfortunately this is not something that we can advise you of. Detailed guidance can be found in the HMRC leaflet (Notice 701/1) that is designed for charities.If you are unsure how the VAT rules apply to you, please either contact HMRC or your tax advisors.
Does a Community Amateur Sports Centre (CASC) qualify for the relief?
No, unfortunately this relief only applies to registered charities.
Third Party Intermediaries
I've signed up through a Third Party Intermediary (TPI). Does this impact my ability to claim VAT & CCL relief?
No, we supply your business with energy not the TPI. So if you qualify for VAT or CCL relief these will be applied to your account in the normal way. Please note, depending on your circumstances you may be required to submit a VAT declaration or PP11 form.
Other Intermediaries
I own a block of flats that I rent out and have an electricity account in relation to that. Can this be treated as qualifying use?
Yes, this would be treated as domestic use, which means that the supply would be liable to the reduced rate of VAT and would be excluded from CCL (internal area of the premises only). Please complete VAT certificate to be eligable.
Renewable Energy
I'm on a Renewable tariff and exemption from CCL. Is that correct?
The Government changed the rules with effect from 1 August 2015 and only supplies of electricity generated from renewable sources prior to that date are exempt from CCL. Please get in touch with us if you are unsure whether or not your account is exempt from CCL.
Please note, if the exemption does apply, it is not necessary to complete a PP11 form.
Supplies to Electricity Producers
My energy supply is used in the production of electricity. Do I still need to pay CCL?
No, not necessarily. The use of energy to produce electricity is often exempt from CCL. You should refer to HMRC’s guidance if you are unsure of your position.
Other Uses Qualifying for Exemption
Do any other uses of energy qualify for CCL exemption?
Yes, some energy uses do qualify for exemption, for example energy used:
- In some forms of transport
- For use metallurgical and mineralogical processes.
Please see the HMRC website for further details.
High Energy Usage
I've entered into a Climate Change Agreement (CCA) with the Environment Agency (EA) and understand that I'm entitled to a reduced rate of CCL. Is that correct and if so, how do I secure this rate?
That is correct. Energy intensive businesses that have entered into a CCA with the Environment Agency can claim the reduced rate of CCL, which is a reduction on the main rates of CCL.
The level of the reduced rate varies according to taxable commodity.
The CCA certificate is used to support a claim for relief of CCL and sets out the date from which the CCL relief will apply. Relief can be obtained by completing a PP11 form.
General
I've been over-charged VAT. How do I correct this and be refunded?
If you believe that your energy supply is put to a qualifying use then you should complete a VAT declaration and submit this to us.
Please note, HMRC guidance allows us to backdate the relief for a maximum of 4years (if appropriate). And VAT certificate can be backdated, even if one has previously been submitted.
Can I backdate my PP11 form?
A PP11 form can be backdated providing that there isn’t already one in place. For new claims for relief, we can backdate for up to 4 years (if appropriate).
If you previously submitted a PP11 form and wish to recover overpaid CCL you should submit form CCL200X to HMRC (please see their website for details – www.HMRC.gov.uk)
Are PP11’s and VAT declarations open-ended or do I need to renew them?
PP11’s expire after 5 years, but we would suggest that you should be reviewing them at least once a year. You should ensure an updated PP11 is provided before the end of the 5 year period. If you don’t, once the certificate lapses we will be required to charge you with CCL.
It is not necessary to renew VAT declarations.
I've changed the use to which the premises are used for. What do I need to do?
You should provide us with a revised PP11 or VAT declaration form as soon as possible. If there is no longer any entitlement to any relief, please submit a new VAT declaration/PP11 showing a relief claimed of 0%.
Note, due to HMRC rules we are unable to backdate PP11’s if there is already one in place.
I had a PP11 in place with a previous supplier. Can a PP11 be transferred between suppliers?
No, you should submit a new PP11/VAT declaration if you change suppliers.