Business VAT for energy supplies
What rate of VAT should I be charged for my gas or electricity?
VAT for business consumers of energy has recently been changed in line with the general change to VAT, and is now charged at 20%. However, businesses using less than an average of 33 kWh of electricity or 145kWh of gas per day may be eligible for a reduced rate billed at 5% (also known as a De-minimis rate). This also applies for certain types of business use, as detailed below.
Does my business qualify for the reduced rate on electricity?
If your premises use less than an average of 33 kWh of electricity per day (1,000 kWh per month), your business will be billed at 5% VAT. This limit applies whether the bill is based on a meter reading by either the supplier, the customer or on an estimate.
Does my business qualify for the reduced rate on gas?
If your premises use less than an average of 5 therms or 145 kWh of gas per day (150 therms or 4,397 kWh per month) your
business will be billed at 5% VAT. This limit applies whether the bill
is based on a meter reading by either the supplier, the customer or on
What other criteria does my business need to meet for VAT to be levied at 5%?
If your premises uses more than the De-minimis amounts, you may still qualify for the reduced rate if the site falls into one of the following categories:-
· For domestic use
· A building, or part of a building, which consists of a dwelling/dwellings
· A building, or part of a building, used for a residential purpose
· A home or institution providing residential accommodation for children
· A home or institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present medical disorder
· A hospice
· Residential accommodation for students or school pupils
· Residential accommodation for members of any of the armed forces
· A monastery, nunnery or similar establishment
· An institution which is the sole or main residence of at least 90% of its residents (except use as a hospital, prison or similar institution, a hotel, inn or similar establishment)
· Self catering holiday accommodation
· A caravan
· A houseboat
· A charity other than in the course of furtherance of a business
· Where there is a supply of goods or services partly for domestic or charitable endeavours
If at least 60% of the goods or services qualify, the whole shall be treated as meeting the criteria)
In any other case, an apportionment shall be made to determine the extent to which the business meets the criteria.
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