For most businesses the current rate of VAT for energy is set at 20%. However, some organisations are eligible to pay a lower 5% level of VAT so it is important that you are aware of your obligations and your entitlements.

VAT rates and CCL (Climate Change Levy) on energy are intrinsically linked so that if you are liable to a reduced rate VAT you are usually exempt from CCL. Together this can amount to a significant amount of over payment if you don’t ensure that you are paying the reduced rate if you are entitled. In addition, it is not the supplier’s responsibility to apply a reduced rate in most circumstances and so if you are responsible for the energy supplies for your business you need to make sure that you have completed the right paper work to claim the reduced rate.

Many organisations don’t even realise that they could make these claims. Power Direct deals with this as part of its service to clients when it sets up contracts for supply and then continue to monitor bills through its invoice validation service. Sinead Smith, Lead Energy Consultant at Power Direct, said, “We deal with a lot of organisations that are entitled to a reduced rate VAT and checking their bills for the correct application of VAT rates has resulted in £40,000 being returned to our customers this year. Many of these companies aren’t registered for VAT and so the refund of CCL and VAT directly benefited them financially.”

Sinead went on to say; “If you are a charity, purchase energy for domestic premises, care homes, holiday accommodation, churches or other religious buildings then you should contact us for advice.  If you think you are being incorrectly billed, we would be happy to advise you and check your billing status. It is possible to make a claim up to four years in arrears for overpaid VAT so it really is worth checking out.”

If you’d like advice, please get in touch

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