These days, UK companies are really feeling the pinch of those ever-increasing electricity bills. Most folks are poring over their kilowatt-hour usage or trying to negotiate better rates, but there’s a sneaky little expense that’s probably eating into your budget without you even realising: VAT.
It’s true! Lots of business energy VAT rates range from 20% when they could be paying a much more manageable 5%. And get this: if you’ve been overpaying for ages, you might be able to get some of that money back under the business energy tax relief UK scheme.
Here at E for Energy, we’re experts at helping businesses find these hidden savings. We’ll take a good look at your energy bills, check if you’re eligible for a lower VAT rate, and hook you up with electricity providers who offer the best cost-per-unit. We make sure you’re not throwing away hard-earned cash on your energy bills.
Let’s break it down simply. Here in the UK, your business electricity and gas bills will usually have Value Added Tax (VAT) added on at the standard rate of 20%. This 20% gets tacked onto your energy usage costs and other charges, such as the Climate Change Levy (CCL).
But here’s the good news: in some cases, businesses can qualify for a lower VAT rate of just 5%. This isn’t just a small saving—it can add up to huge amounts of money saved each year, especially if your business uses a lot of energy.
For example, if your business’s energy bill is £2,000 each month, the difference between being charged 20% VAT and 5% VAT is £300 every month. This means you could save a massive £3,600 every year, and that’s not even taking into account the actual price you pay per unit of energy.
Many businesses are still paying the standard rate, either because they’re unaware they could be eligible for the lower rate, or simply because no one has thoroughly checked their bill.
But who really gets to use the 5% VAT rate? HMRC has laid out specific criteria:
If you consume less than 33 kWh of electricity daily (which translates to 1,000 kWh monthly) or 145 kWh of gas daily, you might be eligible for the reduced rate.
2. Charities and Non-Profits: So, if your organization is a charity or a non-profit and you’re using energy for things that aren’t business-related, you might be able to get charity energy VAT discount. If you want to claim charity energy VAT discount, you need expert guidance from E for Energy.
3. Mixed-Use Premises: Got a place where you mix things up, like a house where you also run a small business? If at least 60% of your energy goes towards the living side of things, you could get the 5% VAT rate on your whole energy bill.
Even though it seems straightforward, the rules can be a bit of a maze, and it’s easy to mess up. Lots of businesses are in the dark about figuring out their typical energy use, or maybe their energy provider hasn’t put them in the right category. Some just haven’t ever turned in the right VAT forms. With the proper guidance you might be able to receive Energy bill VAT reclaim.
This is where E for Energy comes in to help. We look at your bills, how you use energy, and what type of business you run to figure out if you qualify for a refund. If you do, we’ll guide you through the paperwork and get back the VAT you overpaid—going as far back as four years.
For example, one hotel we worked with was mistakenly charged the full 20% energy bill VAT, even though they had a lot of non-commercial space. With our assistance, they not only got their business energy tax relief but their VAT rate lowered from then on, but also reclaimed over £8,000 in charges they had already paid.
Your electricity bill probably has some extra costs you might not know about besides VAT. If you check closely, you’ll see something called the Climate Change Levy (CCL) – basically, it’s an environmental tax to get everyone to use energy more wisely.
This CCL is charged on each unit of electricity (per kilowatt-hour), and while the charge per unit is pretty low, it can quickly add up, especially if you use a lot of power. But get this: if your business is eligible for a lower VAT rate, you might also be able to get a discount or even an exemption on the CCL.
For instance, charities that use energy for things that aren’t business-related usually don’t have to pay the CCL. Also, energy used for homes or residential stuff can be excluded too.
Even so, suppliers tend to put CCL on the bill automatically, particularly if they’re unsure about how you’re using the energy. Over at E for Energy, we take a look at VAT and CCL side-by-side to ensure you’re not paying more than you should be in either area.
For example, there was this data center we helped out. They were being slammed with both the full VAT rate and CCL, even though they were actually eligible for some discounts. But after we reviewed everything, they ended up saving over £10,000 each year just from getting their bill fixed and switching to a different supplier.
Getting that lower VAT rate is a great first step to cutting your energy costs, but it’s really just the start.
Here at E for Energy, we’re all about helping businesses find the absolute best price for their electricity per unit. So, we don’t stop at the VAT rate. We also dive into your existing contract, compare what other suppliers are offering, and handle the whole process of switching you to a cheaper provider – all without any interruption to your service.
Our technicians have seen it time and again: businesses locked into energy contracts that are either too expensive or completely out of date, simply because they weren’t aware of the better options out there. When you add on being charged too much VAT and CCL, the extra costs can really add up.
Let’s say you make a few smart moves:
• You change suppliers, going from one that charges 34p per kWh to a cheaper option at 28p.
• You manage to lower business energy VAT rates from 20% down to just 5%.
• You get rid of those pesky CCL charges that you don’t really need.
By doing all three of these things, you could shrink your energy bill by a quarter or even more. This is especially helpful for industries that use a lot of power, like hotels, manufacturing, or fashion outlets.
Understanding your energy bills can feel like a real headache, and VAT often gets lost in the shuffle. But here’s the thing: if your business is actually eligible for a lower VAT rate but you haven’t done anything about it, you might be missing out on thousands of pounds!
Instead of trying to figure it all out yourself, let the pros at E for Energy take a look at your situation. We’ll:
* Have a good look at your current electricity bills
* See if you qualify for lower VAT and CCL rates
* Help you get back any money you’ve overpaid
* Put you in touch with an energy supplier that’s cheaper
The best part? The audit won’t cost you a thing, we’ll handle all the boring paperwork, and you could end up saving a ton of money.