A Guide to VAT for Business Gas

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    When a business reaches the point where it generates a taxable turnover of more than £85,000 a year, it is a legal requirement that it is registered for VAT. Currently, the standard VAT rate in the UK is 20%, but there are additional VAT rates that can mean you pay less. Even if a business does not cross the £85,000 threshold, they can voluntarily register for VAT, and there are pros and cons to doing so. Typically, those businesses that are registered for VAT will need to make payments every three months to HM Revenue and Customs, with payments based on 20% of the price of your goods and services.

    Gas VAT Thresholds and Discounts

    Your business will be entitled to the heavily reduced rate of just 5% VAT if your gas use meets certain criteria. You must check your eligibility for a reduced VAT rate on your gas payments because it can make a substantial difference to your overall costs. It’s worth looking closer at the 5% VAT rate if:

    • Your gas use is particularly low. If your business uses less than 145kWh a day (or 4,397kWh a month), you will be eligible to pay the 5% reduced rate in most cases. This is one of the common reasons the average business finds eligible for the 5% VAT rate.
    • Your business uses at least 60% of its gas for domestic purposes. For care-homes, self-catering holiday accommodation, or in some cases, those running a business from home, there may be eligibility for a lower VAT rate on your gas costs. This can vary in how it is structured, with some cases where the 5% rate is applied to the entire bill and others where the 5% is applied only to the energy that’s being used for domestic purposes.
    • Your business is a non-profit organisation or charity.

    If you think that you fall into any of these categories, then you need to ask your gas supplier for a VAT declaration form. You may even be entitled to repayments if you have been paying the 20% VAT price unnecessarily (although this will only go back for the last four years). It’s also worth knowing that if you do qualify for the discount, you may also be eligible for a reduced price (or, in some cases, a full exemption) on your climate change levy. Once you have filled out the VAT declaration form and it is approved, then all future bills from your gas supplier will have the new VAT rate automatically applied.

    Making A Claim for Reduced VAT on Gas

    It can be a little more complicated for a business owner to make their claim for reduced VAT for business gas in some cases. You may need to contact a range of suppliers, filling out a declaration form from each. If you have changed your energy supplier during the period you are claiming for, or if you have used different energy suppliers across multiple locations, or if those different locations vary in terms of their eligibility, that can mean a fair amount of paperwork.

    The Climate Change Levy (CCL)

    Although not the same as your VAT, it’s worth remembering that if you are eligible for a discount on your gas VAT, then there’s a very good chance that you may be exempt from the CCL. The CCL is intended to help encourage reduced gas use and emissions, and there are two rates. There’s the main levy rate, which you will be charged if you are not eligible for the VAT reduction and are still paying 20% VAT on your gas bills. There’s also the Carbon Price Support rate, but this isn’t very common to see as it only applies to those businesses that generate electricity or are CHP stations.

     

    It’s always worth finding out more about the VAT that you’re being charged for your gas usage. Running a business means ensuring that you have total control of your finances. Misapplied VAT can mean an additional cost that drives into your profits and makes it harder to stay afloat. Take the time to check your VAT rate, and if you believe that you are entitled to a reduction, then contact your supplier to discuss getting the VAT declaration form that could see you paying a lot less on your gas bill.

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        To get your quotes at lightening speed we need several key pieces of information which can all be found on your electricity bill. But by simply ticking this box, we can search ‘industry held data’ to get your meter number, electricity consumption and current energy supplier. This means that we can get you quick quotes without asking you to dig out all of your paperwork. This is personal data therefore we need you to allow us to access this information.
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