Value Added Tax and Climate Change Levy Explained Value Added Tax and Climate Change Levy Explained 2/7

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Value Added Tax and Climate Change Levy explained Value Added Tax and Climate Change Levy explained 2/7

VAT and CCL explained This e-guide explains the rates at which Value Added Tax (VAT) and Climate Change Levy (CCL) are chargeable on electricity and gas supplies. Value Added Tax (VAT) and greater efficiency of energy All other business customers entitled In line with current legislation (VAT used for business or non-domestic to CCL relief must submit a PP11 Act 1994 as amended), there are two purposes. Supplier Certificate for each supply rates of VAT applicable to supplies of CCL is chargeable only on units/ covered, to advise us what percentage electricity and gas used for business or kWh used and not on any other of CCL relief is applicable. PP11s can non-domestic purposes: component of the bill such as fixed be downloaded from the HM Revenue daily charges. & Customs (HMRC) website: • the standard rate www.hmrc.gov.uk. • the reduced rate Separate rates have been set for Where an electricity or gas supply is electricity and gas. These are now used wholly or partly for domestic indexed-linked and therefore likely to or charitable non-business use, that increase on 1 April each year. part of the supply qualifies for the Under current legislation: reduced rate of VAT. This is known as • where VAT is charged at the Value Added Tax (VAT) Page 2 ‘qualifying use’. standard rate, CCL (plus VAT on Climate Change Levy (CCL) Page 2 Customers with qualifying use CCL) will usually be added to the bill Types of use explained Page 3 are required to submit a separate • where VAT is charged at the Domestic use Page 4 Customer Declaration Certificate reduced rate, the supply is Charitable non-business use Page 5 for each supply, to advise us what automatically excluded from CCL Mixed use Page 6 percentage is used for domestic or Contact us Back page charitable non-business purposes. • these rules are applied automatically at the time of billing Climate Change Levy (CCL) Further information regarding VAT CCL is a government-imposed tax to or CCL is available from HMRC: encourage reduction in gas emissions www.hmrc.gov.uk

Types of use explained Business or non-domestic use There is no requirement for the not meet the government’s qualifying If your electricity or gas supply is used customer to claim the reduced rate criteria to be considered as domestic solely for business or non-domestic of VAT or exclusion from CCL on or charitable non-business use. purposes, VAT will usually be charged low usage as these concessions are We cannot assume a percentage at the standard rate and CCL (plus applied automatically at the time of of qualifying use on behalf of the VAT on CCL) will also be added to the each billing. customer. In the absence of a valid bill. Domestic or charitable non- Customer Declaration Certificate, business use (qualifying use) supplies will be charged VAT and CCL Low usage business or at the rates appropriate to business non-domestic use If your electricity or gas supply is or non-domestic use. Where there is Under a government concession, used wholly or partly for domestic or both qualifying and non-qualifying ‘low usage’ of electricity and gas for charitable non-business purposes, that use of the supply, this is known as business or non-domestic purposes part of the supply qualifies for the ‘mixed use’. Please refer to the mixed is chargeable at the reduced rate of reduced rate of VAT and for exclusion use section on page 6 for further VAT. These supplies are automatically from CCL. This is known as qualifying details. excluded from CCL. use. The low usage thresholds are: The percentage of qualifying use can vary between energy supplies to the • electricity - at or below 33 units same site. Customers are therefore per day during the bill period required to submit a separate • gas - at or below 145 kWh per Customer Declaration Certificate per day during the bill period fuel, per account, to advise us what Where more than one meter is billed percentage of each supply meets on an account, consumption across the qualifying criteria (set by the all meters is combined in order to government). Further information regarding VAT take into account the total quantity See pages 4 and 5 for further details or CCL is available from HMRC: supplied through all relevant meters. regarding which activities do and do www.hmrc.gov.uk

Domestic use What types of supply are considered to be domestic use? More detailed information can be obtained from 701/19 - Fuel and Power HMRC: www.hmrc.gov.uk 701/20 - Caravans and Houseboats See the following HMRC VAT notices available from their website:

Types of premises Domestic use Non-domestic use The activities below are considered to be domestic use The activities below do not meet HMRC criteria for domestic use Residential premises • Any self-contained dwelling such as a house or flat • Running a business from home in general • Caravan • By law, electricity and gas supplied to establishments such as: • Houseboat - hospitals, prisons and similar • Job-related accommodation including vicarage, manse, etc - hotels, B&Bs and similar • Monastery, nunnery or similar establishment • are not considered to be supplied for domestic use • Residential accommodation for the Armed Forces Residential homes • Home or institution providing residential accommodation for • Supplies within a residential home used for office/ managerial children activities • Home or institution providing residential accommodation for people in need of personal care because of: - old age or disability - past/present dependency on drugs or alcohol - past/present mental disorder • Hospice or palliative care Caravan • Caravans solely for residential use either on a full-time, • Business activities carried out from a caravan parks/ holiday weekend or holiday basis • Supplies within a caravan park used for office/managerial accommodation • Caravans hired out on a self-catering basis activities • Shower/toilet blocks for the use of those staying in the caravan • Non-residential services within a caravan park such as retail or park catering outlets • Self-catering holiday accommodation • Leisure or sport activities for which a charge is made • Staff residential accommodation in a hotel or B&B establishment • Hotel or B&B accommodation Schools and • Residential accommodation for boarding students and staff • Ancillary rooms used by non-boarding students and staff other educational • Ancillary rooms used by boarding students and staff including: including: establishments - kitchens - kitchens - dining rooms - dining rooms - bathrooms - bathrooms - study rooms, etc - study rooms, etc

Charitable non-business use What types of supply are considered to be charitable non-business use? Although you must either be a registered charity or If you are a registered charity and the supply is See the following HMRC VAT notices available have your charitable status recognised by HMRC, used for domestic purposes, your declaration from their website: that in itself is not deemed to be an automatic should be on the basis of domestic use. 701/1 - Charities qualifying use. There is no general VAT relief for See page 4. 701/5 - Clubs and Associations charities on electricity and gas supplies. However, More detailed information can be obtained from 701/30 - Education legislation does provide specific relief for the non- HMRC: www.hmrc.gov.uk 701/35 - Youth Clubs business activities of a charity, whereby that part of the supply is seen as a qualifying use.

Types of premises Charitable non-business use Charitable business use The activities below are considered to be charitable non-business The activities below do not meet HMRC criteria for charitable use non-business use Charities in general • Activities or services provided, which are funded by • Where the activity or service is provided in return for a - grants consideration - donations • Where the activity has a degree of frequency or scale - voluntary contributions • Any membership subscriptions which provide members with - investment income additional benefits such as discounted entrance fees • Membership subscriptions which only provide members with copies of reports, annual accounts and the right to vote at meetings Churches and other • Where the supply is used for worship and related meetings • Where any part of the premises are used for nonchurch places of worship • Where income is generated by donations, voluntary purposes contributions or investment income, rather than by fixed • Where income is generated from hiring or renting out the charges facilities • Where the premises are hosting fundraising activities, where goods or services are supplied in return for payment Village halls/ • Activities or services provided, which are fundedby: • Fundraising activities such as: community centres/ - grants - hiring or renting out the facilities leisure centres - donations - charging admission to events held on the premises - voluntary contributions - sale of goods and services including food and refreshments - investment income • Any membership subscriptions which provide members with - Membership subscriptions which only provide members with additional benefits such as discounted entrance fees copies of reports, annual accounts and the right to vote at meetings Education • Where the education provider: • Where the education provider does not have charitable status - has charitable status and • Where the education provider has charitable status but makes - does not charge for their services a charge for their services, e.g. tuition fees, hiring out the premises, etc B325.IH.08/15.v2 © Copyright EDF Energy 2015. All rights reserved. 6/7

Mixed use Where there is a mix of activities, at the reduced rate of VAT and some of which meet the is excluded from CCL. Your government’s criteria for domestic Customer Declaration Certificate or charitable non-business use and should, however, reflect your best some which do not, you will need to estimate of the actual percentage estimate the split between qualifying of qualifying use for each meter as, and non-qualifying use, for each under HMRC guidelines, we cannot individual meter, in order to submit accept wording such as ‘over 60%, the appropriate VAT declaration. therefore 100%’ - or similar - and Your estimate can be based on any will have to return the certificate to you for further clarification. method that is ‘fair and reasonable’, Declaration forms: such as rating of appliances, annual • Where there is between 1-59% Customers with qualifying use are required consumption or square footage. qualifying use (either domestic or to submit a separate Customer Declaration Certificate for each supply, to advise us what Charities can use their annual charitable non-business), that part percentage is used for domestic or charitable non- accounts to estimate the split of the supply will be charged at business purposes. Important information between ‘non-business’ funding and the reduced rate of VAT and will VAT Customer Declaration Certificates and ‘business’ income. automatically be excluded from PP11 Supplier Certificates are not transferable CCL. The non-qualifying use will between suppliers. When changing suppliers, you In all cases, you must be able to should ensure that the appropriate certificates demonstrate to HMRC (if required), be subject to VAT and CCL at the are submitted to your new supplier, advising appropriate business /non-domestic the percentage of relief which is applicable to that any VAT declaration you submit, each supply. Once accepted, your declaration represents a valid qualifying use. rate will remain valid indefinitely. If there is a change in your qualifying use, you should notify us Currently: by submitting a revised Customer Declaration Certificate. Any false statement or failure to notify • Where there is 60% or more us of a change in qualifying use may make you qualifying use (either domestic liable to a financial penalty under the VAT Act 1994 (as amended from time to time) or charitable non-business), the whole of the supply is chargeable Download a certificate here

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