VAT on business energy

Unless we are otherwise informed, VAT will be applied to your business energy invoice at the current standard rate of 20%. However, your organisation may still be eligible for a reduced VAT rate.

There are a number of scenarios in which your business may be eligible for VAT reductions on your business energy bill:

  • If your business meets the de minimis requirements.
  • Where an electricity or gas supply is used wholly or partly for domestic or charitable non-business use, or ‘qualifying use’.

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VAT for business gas

Gas for business use is charged at 20%, although if you use less than a certain amount (known as the de minimis level – see below), then you may be eligible to pay only 5% VAT instead.

VAT for business electricity

Like gas, business electricity is also charged at 20%, and if your business uses less than the de minimis amount, then you’ll also qualify for the lower rate of 5%. 

De Minimis customers

If your average daily consumption of energy is lower than the de minimis threshold that we mentioned above, then you are eligible to be billed at 5% VAT on your gas and electricity bills. Your average daily usage must be no more than:

  • 33kWh (1000 kWh per month) of business electricity
  • 5 therms or 145 kWh (150 therms/4397 kWh per month) of business gas

The de minimis rule is especially useful for smaller businesses, where one of the income streams is exempt. For instance, if it has exempt rental income from a residential investment property portfolio.

What are Qualifying Use customers?

In instances where a property consumes energy for domestic or charity use, as well as commercial, usage for this part of the supply will qualify for the reduced rate of VAT (5%).

Customers with qualifying use must submit separate customer declaration forms highlighting the usage figures for each supply purpose. This is so that we can determine what percentage of the bill is eligible for the VAT reduction.

If you are eligible for a reduced VAT rate, you must send us a fully-completed VAT Declaration Certificate before we send you your first invoice to ensure the reduction is applied. 

Further information

To find out if you are eligible for reduced rates please read our VAT and CCL guidance notes.

Alternatively, for further information regarding VAT, don’t hesitate to contact our energy advisors on:

Additionally, customers can look up the HMRC advice centre or website: http://www.hmrc.gov.uk or HMRC National Advice Centre 0845 010 9000.

Other Useful Information

Are business rates exempt from VAT?

Bills and payments FAQs

How to understand your bills