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How to Save VAT on Business Electricity

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VAT on business electricity: The facts

All business energy is subject to VAT
VAT on business energy accounts is normally in the region of 20%
Unfortunately, this VAT can’t be claimed back
However, your business may be eligible for a VAT discount on your business energy

Do you qualify to save VAT on business electricity?

Your business could be eligible for a reduced VAT rate of 5% on your energy bills if you meet one or more of the following criteria:

A minimum of 60% of your energy consumption is used for non-commercial purposes.
You are a non-profit or charitable organisation.
Supplies of certain small quantities of fuel and power, known as de minimis, are always treated as being made for domestic use, even when the supply is to a business customer:
You use less than 1,000kWh of electricity per month, or 33kWh per day
You use less than 4,397kWh of gas per month, or 145kWh per day

Your business may also qualify for a reduction of VAT on business electricity through the Climate Change Levy (CCL), a policy that encourages businesses to use energy efficiently and reduce carbon footprints.
Sign a Climate Change Agreement (CCA) to get a discount on the CCL tax. This is essentially a signed commitment to reducing your business’s emissions and energy consumption.

Even if your business qualifies for a business energy VAT reduction, your supplier may not be applying it correctly – or at all! Reduced VAT should be incorporated into your energy bill by default, but energy suppliers often neglect to do this.

How to ensure you are getting the correct VAT on business electricity

Check your energy bill regularly to ensure you are paying the correct rate.
Use the services of an energy consultant to ensure the accuracy of the tax associated with your bills.

Don’t qualify for any VAT discounts?
Even if your business doesn’t qualify for reduced VAT on business electricity, there are other ways to reduce your business energy bill.

Read our Business Energy Saving Guide for simple solutions to help your business save money and use energy more efficiently.

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