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How to save VAT on your business electricity

Lifehack: How To Save VAT On Your Business Electricity

Energy is an unavoidable business expense. And although all business energy is subject to VAT (normally around 20%), this VAT cannot be claimed back in a tax return.

The good news, however, is that your organisation could be eligible for a business energy VAT discount or reduction if it meets certain criteria.

Does your business qualify to save VAT on energy?

  • Is most of your energy used for domestic/ non-commercial purposes?
  • Is your organisation a non-profit?
  • Are you a charitable organisation?
  • Do you use less than than 1,000kWh of electricity per month (12,000 kWh per year)?
  • Do you use less than 4,397kWh of gas per month (52,764 kWh per year)?

If you answered ‘yes’ to any of the questions above, your business could qualify for a reduced VAT rate of 5%.

Examples of organisations that may qualify for VAT reductions:

  • Children’s homes
  • Homes for the elderly or the disabled
  • Hospices
  • Religious communities
  • The residential accommodation of education institutions
  • Self-catering holiday accommodation

VAT reductions through the CCL

The Climate Change Levy (CCL) is a government-imposed tax set to encourage businesses to use energy efficiently and reduce carbon footprints in the process. If your business is eligible for a reduced VAT rate, it should be automatically excluded from paying the CCL.

How to apply for your VAT reduction

Ask your energy supplier for a VAT Declaration Form, which you can use to apply for the relevant VAT reductions on your energy bill. You can also claim for any overpayments over the last four years.

If your business uses less than 1,000kWh of electricity and less than 4,397kWh of gas per month, your usage is classified as ‘de minimis’. If this is the case, your supplier should apply the reduced VAT rate by default, without you having to complete a VAT declaration certificate. But don’t become complacent – even if your business does qualify for a reduction, your supplier may not be applying it correctly.

Remember, you’ll need to submit a new VAT certificate if:

  • You change energy suppliers
  • Your energy use changes
  • You move premises

To ensure that you are paying the correct VAT amount, check your energy bill regularly to see if your usage falls below the de minimis levels. Using the services of an energy consultant is an easy way to ensure the accuracy of the tax associated with your bills. Business energy brokers like Smarter Business have the expertise to advise your business on its VAT, levy, and tax standing. They can assist you in identifying your eligibility for VAT exemptions and reductions and help you apply for them.

Guest blog provided by Smarter Business. Smarter Business offer businesses savings on all essential services, such as business energy, business gas and electricity, business loans, business telecoms solutions, business insurance, facility maintenance, waste management and more. They have helped over 40 000 businesses save millions over the years. For more information, please go to: Smarter Business

At Boost Capital, we offer business loans and merchant cash advances for small businesses that can help you to optimise your working capital. For further information about our flexible, alternative business funding solutions, or to discuss your specific requirements, please get in touch – our skilled and experienced team is always on hand to help.

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