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VAT on business energy

VAT is calculated on energy supply to businesses at 20%. However, there are some exceptions where supplies to businesses may be eligible for the reduced rate at 5%.

You may be eligible if:

  1. The meter is for domestic use
  2. The meter supplies a charitable organisation that carries out non-business activities
  3. There is low usage on the meter

If you believe your meter may fall into one of the first two categories, please see our guidance sheet for further information, or our section on qualifying use. You can also check out our FAQs.

To apply for the reduced rate for one of these reasons you will need to complete a VAT declaration and submit this to our Welcome Team at customeronboarding@sefe-energy.com.

If you believe that your meter may fall into the third category, please see our section on De Minimis.

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De Minimis customers

De minimis is a term used to describe the threshold at which VAT will either be charged at 5% or 20% if the site does not qualify for a VAT exemption. If the consumption falls below the de minimis level, this is considered as domestic use by HMRC regardless of the actual use and will be charged at 5%. In these instances, consumption is calculated based on meter reads and the VAT will be calculated from this so you will not need to provide any supporting evidence.

The de minimis level for gas consumption is below an average rate of 5 therms or 145 kilowatt hours per day, 150 therms or 4,397 kilowatt hours per month to qualify for VAT at 5%. For electricity the de minimis threshold is below an average rate of 33 kilowatt hours per day, 1,000 kilowatt hours per month.

For more information, visit gov.uk. De minimis is explained in sections 3.2.2, 4.2 (for gas) and 5.2 (for electricity).

What are Qualifying Use customers?

If a site qualifies as either domestic or charitable non-business use, they may be eligible for the reduced rate of VAT.

  • Domestic Use: The meter must supply a dwelling or other residential accommodation to qualify as domestic use. If there is a mix of business and domestic use at the property, the split will need to be calculated when informing us of the amount of qualifying usage.
  • Charitable Non-Business Use: The meter must supply a site where charitable activities take place. The eligible activities must be considered non-business use. If there is a mix of business (including charitable) and non-business use, the split must also be calculated.

    For examples of how activities are categorised by HMRC, please see our guidance sheet.

    If there is mixed usage and you are unsure how to calculate the split, this can be discussed with HMRC directly.

    If activities fall into either of the categories above, then please complete a VAT Declaration Certificate and submit to customeronboarding@sefe-energy.com.

Further information