How much VAT?

Generally speaking electricity used for business purposes is subject to VAT at 15%
However the actual rate you pay depends on:

• How much electricity you use 
• What you use it for 
• Whether you are a registered charity

Thirty three units a day
If on average you use less than 33 units of electricity a day (around 3,000 a quarter) VAT will apply at 5%. This rule applies whether you use electricity for ‘business’ or ‘domestic’ purposes. It also applies whether your bill is based on a meter reading or an estimate.

Domestic Use
If you use electricity for ‘domestic’ purposes you are entitled to pay VAT at 5%. For more information contact HM Customs & Excise and ask for Notice 701/19.
‘Domestic’ use includes:

• A house, flat or other self-contained dwelling 
• Certain types of residential accommodation such as a children’s home, hospice or care home for the elderly or people with disabilities
• A caravan or houseboat 
• Self-catering holiday accommodation

The following are generally not entitled to claim the lower rate VAT:

• Hotels, guesthouses, B&B’s and similar establishments
• Prisons and similar institutions
• Hospitals
To claim the lower rate VAT please complete and return ‘VAT Declaration’ form.

Combined Business and Domestic use (inc. Farms)
Customers can apply to pay 5% VAT for the ‘domestic’ portion of their bill. Since the meter cannot show this separately the customer must declare, as a percentage, how much electricity is for ‘domestic’ use.
You must be able to demonstrate to HM Customs & Excise how you arrived at this figure. If ‘domestic’ use is 60% or more then VAT will be applied to the whole bill at 5%. To claim the lower rate VAT please complete and return the ‘VAT Declaration’ form.
Example:
In a caravan park electricity is supplied to the individual caravans plus the site shop. Since electricity used in a caravan qualifies as ‘domestic’ use it attracts VAT at 5%. Electricity used in the shop is for ‘business’ use and attracts VAT at 15%. The site owner calculates that 90% of the electricity used on the site is in the caravans and only 10% in the shop. He therefore puts 90% ‘domestic’ use on the VAT Declaration form. However since he has declared more than 60% ‘domestic’ use VAT will be applied to the whole bill at 5%.

Charities
Charities are generally not entitled to claim VAT at 5% unless the electricity is used for only of the ‘domestic’ purposes listed. However they may claim VAT at 5% for electricity used for providing ‘charitable non-business’ activites such as free day care for people with disabilities. For more information contact HM Customs & Excise and ask for Notice 701/1/95.
To claim the lower rate VAT you must complete and return the ‘VAT Declaration’ .

Climate Change Levy (CCL)
CCL applies to electricity which attracts VAT at 15%. Certain businesses may claim exemption from CCL. For more information contact HM Customs & Excise and ask for a PP11 form.