In response to the impact of climate change, the UK government provides several environmental tax and relief schemes encouraging businesses to operate in a more environmentally friendly manner.
Of these many measures is the Climate Change Levy (CCL), an environmental tax first introduced in April 2001. But what does it entail? We'll clear up any confusion you might have below.
What is the Climate Change Levy (CCL)?The Climate Change Levy is an environmental tax charged on the energy that businesses use. It’s designed to encourage businesses to be more energy efficient in how they operate, as well as helping to reduce their overall emissions.
The CCL applies to businesses in the industrial, public services, commercial and agricultural sectors, and is charged on ‘taxable commodities’ for heating, lighting and power purposes.
CCL is paid at either the main rate or carbon price support (CPS) rate, the differences in which are detailed below.
Any business in the industrial, public services, commercial and agricultural sectors will be charged CCL at the main rate on electricity, gas and solid fuel (e.g., coal, coke, lignite or petroleum coke) use. The CCL main rates are listed on your business gas or electricity bill.Businesses exempt from paying main CCL rates include charities engaged in non-commercial activities and businesses that consume energy below the de minimis limit.
Carbon Price Support rates
If you own generating stations or you operate combined heat and power stations, then you will be required to pay the Carbon Price Support rate. The levy rate varies for each commodity: kilowatt-hours for gas and electricity, and kilograms for all other taxable commodities.
However, if you generate your own energy and make money through the Feed-in Tariff, it's unlikely you will have to pay the levy since you'll be classed as a small generator.
Business energy suppliers are responsible for charging the appropriate CCL, as they supply the taxable commodities. Once the energy supplier has collected the CCL charge, it is passed on to HM Revenue & Customs. If you’re a business customer with us, the CCL rate and charge is displayed as separate items on your monthly gas or electricity invoice.
Each business must register for the Climate Change Levy. If you do not pay the Climate Change Levy – or you do not register – you'll have to pay a penalty of £250 for each instance.
For the latest CCL rates per kilowatt-hour on natural gas and electricity, please refer to the table below.
1st April 2020 to 31st March 2021
1st April 2021 to 31st March 2022
1st April 2022 to 31st March 2023
1st April 2023 to 31st March 2024
1st April 2024 to 31st March 2025
For the latest CCL percentage discount for holders of a climate change agreement for gas and electricity, please refer to the table below.
To pay a reduced main rate on CCL charges, energy-intensive businesses must enter into a climate change agreement (CCA) with the Environment Agency. A CCA is a voluntary agreement that aims to reduce energy use and CO2 emissions.
Of course, the trade-off means you'll have to improve your business' energy efficiency and lower your average energy consumption. You'll also have to measure and report your business' energy use and carbon dioxide emissions against targets over four two-year terms.
Businesses which agree to be bound by a CCA will receive a reduction of 90% in the CCL rate paid on electricity bills, and a 65% reduction on all other fuels. You can check if your business is eligible to sign up to a CCA, here.
Providing your business has met its targets at the end of each term, you will then continue to receive the Climate Change Levy discount.
Climate Change Levy exemptions
So, are there any exemptions that mean your business isn't required to pay the Climate Change Levy? The answer is yes, if you meet the following requirements:
Even if you're not exempt, you may still be able to pay a reduced rate by making energy-efficient changes to your business. The best way to do this is to sign a Climate Change Agreement mentioned above.
Claiming back on the Climate Change Levy
If you've overpaid on your Climate Change Levy, then it's possible to claim a tax credit. Head to the Gov.uk page here for more information as well as the necessary forms you'll need to fill in.
How can I make my business more energy efficient?
For more information on the Climate Change Levy (CCL), including how to find it on your itemised business energy bill, we'd be happy to help. Give the SEFE Energy customer service team a call on 0161 837 3395.