Should your business be paying the Climate Change Levy?
Along with value-added tax (VAT), the Climate Change Levy (CCL) is an energy tax that applies to non-domestic consumers in the United Kingdom. The CCL was introduced on 1 April 2001 under the Finance Act 2000 as part of the UK’s Climate Change Programme.
This levy can be charged on both electricity and gas supplies.
This article will answer a couple of frequently asked questions about the CCL.
Why was the CCL implemented?
- To increase energy efficiency of energy used for business or non-domestic purposes.
- To reduce carbon emissions
When the CLL was formed, it was forecast to cut annual carbon emissions by 2.5 million tonnes by 2010.
Which businesses pay the Climate Change Levy?
The CLL is applicable to all energy users. However, those in the transport and domestic sectors are excluded.
Business or non-domestic use
If your energy supply is used solely for non-domestic or for business purposes, you will be charged:
- VAT at the standard rate
- VAT on CCL
Low energy usage business or non-domestic use
If your business or non-domestic has low (de minimis) energy usage you will qualify for a reduced rate of VAT, and you will also be excluded from the CCL. Find out here if your business qualifies for a low-usage VAT discount.
Domestic or charitable non-business use
If your energy supply is used partially or wholly for domestic or charitable non-business purposes, that part of the supply qualifies for both a reduced VAT rate and for exclusion from the CCL.
If your organisation operates with a mix of activities, you’ll need to estimate how to split your usage between your usage that qualifies for exemptions and your usage that does not. However, if 60%+ of your energy usage meets domestic or charitable non-business criteria, then your entire energy supply is charged at the reduced rate of VAT, and you will be excluded from the CCL.
How much is the CCL?
- In 2001, the CCL levy was frozen at 0.15p/kWh on gas, 0.43p/kWh on electricity and 0.15p/kWh on coal.
- In the 2006 budget, however, the government announced that starting from 1 April 2007, the CCL levy would rise annually in line with inflation.
How to reduce the amount that you pay
- By signing a Climate Change Agreement, energy-intensive users can show their intention to reduce their emissions and qualify for a reduction in CCL.
Is your business entitled to CCL relief?
- Submit a PP11 Supplier Certificate for each supply covered
- Advising what % of CCL relief is applicable.
- You can download a PP11s from the HM Revenue & Customs (HMRC) website.
Find out more about the CCL, VAT on electricity and other information relating to businesses energy from expert energy broker Smarter Business.
Shea Karssing is a writer for Smarter Business, one of the UK’s leading independent consultancies, helping businesses secure the most comprehensive savings solutions from utilities contract management. If you have any more questions about the CCL and its impact on your business gas and electricity bills, don’t hesitate to contact the energy experts at Smarter Business.