VAT & Climate Change Levy on business energy — what you should check

The default: 20% VAT, standard CCL

By default, UK business energy carries 20% VAT and the standard Climate Change Levy per kWh on both electricity and gas. Most suppliers apply the default until you provide evidence for a reduced rate — so many qualifying businesses over-pay by simply never asking.

When 5% VAT applies

The reduced 5% VAT rate applies where:

• The premises are wholly or mainly used for a residential or charitable non-business purpose
• Consumption is below 33 kWh/day of electricity (the 'de minimis' threshold)
• Consumption is below 5 therms/day (145 kWh) of gas
• A mixed-use premises can apportion the reduced rate against the qualifying portion

Charities and care

Registered charities, care homes, nursing homes and residential accommodation providers commonly qualify for the reduced 5% rate on the qualifying portion of their usage. A VAT declaration to the supplier — with supporting evidence — triggers the rate change and often unlocks a backdated refund covering up to the last four years.

CCL basics

The Climate Change Levy applies per kWh of non-domestic energy. It is not VATable — it sits inside the unit rate. Qualifying sites (charities, low usage, domestic use) that get 5% VAT are usually also CCL-exempt on the same qualifying portion.

Climate Change Agreements

Energy-intensive sectors can access a substantial CCL discount by joining a Climate Change Agreement (CCA) via their trade association. In return they commit to specific energy efficiency or emissions targets. For qualifying sites (aluminium, ceramics, cement, chemicals, food processing and more) the savings can be material.

The practical checklist

Ask three questions today: does any part of your energy use qualify for 5% VAT? Are you below the de minimis threshold on either fuel? Does your sector have an accessible CCA scheme? If yes to any, get the VAT declaration submitted before your next renewal.