Short guide to VAT and business electricity
Here at Exchange Utility, we are energy experts. Our main role is to help businesses and organisations make smarter, more cost-effective choices about their energy supply.
So when our customers come to us asking if they’re paying the correct amount of VAT on their electricity bills, we can help, and it’s a question that we get asked a lot!
To help our customers who want to better understand the VAT rate on business electricity bills, we’ve put together this quick and handy guide!
What is the VAT on business electricity bills?
The rates of VAT you pay for business electricity depend on the amount of electricity you use.
Most businesses will pay the current VAT rate of 20%on their energy, but despite being a business to business purchase the VAT can’t be claimed back in all cases.*
What you cannot reclaim
The HMRC states that you cannot reclaim VAT for:
- anything that’s only for private use
- goods and services your business uses to make VAT-exempt supplies
- business entertainment costs
- anything you’ve bought from an EU country (you may be able to reclaim VAT charged under the electronic cross-border refund system)
- goods sold to you under one of the VAT second-hand margin schemes
- business assets that are transferred to you as a going concern
Your bills will be itemised to show the amount of VAT you’re paying.
However, not all businesses are subject to the full rate your business may be subject to a reduced rate if:
- Your business is using less than 33kWh per day or less than 1,000kWh per month on average; or
- Non-business use accounts for a significant proportion of your total usage.
What is the VAT on charity organisations’ electricity bills?
There could be a number of additional reductions in place if your charity, organisation or business meets the following criteria:
- The majority of your electricity is used in a domestic setting
- Your premises are a home, hospice, rehabilitation residence or a place of care for children, addicts, members of the armed forces, students or the elderly
- If your organisation is a religious building, such as a church, mosque or synagogue
Still confused about how to work out the VAT you should pay for your electricity?
To find out exactly how much VAT you should be paying for your business, you should speak to a tax specialist or financial expert. There are other exemptions and circumstances which can have an effect on your VAT rate for business electricity.
For help with VAT for business energy?
Call a member of our team on 0800 9777 000 and find out how we can help with your business electricity needs.
Our experienced Energy Consultants are waiting to take your call and will be more than happy to help find you the best energy provider for you and to ensure that you’re paying the correct rate of VAT for your business or organisation.
*Correct at time of writing (May 2018)