Have you had people phoning you trying to get you to spend thousands of pounds on a new heating system? Have they spoken about something called the climate change levy and suggested that your fuel bill will go up? Has a search about the climate change levy search online brought you to this page?
Well lets talk about the climate change levy.
Climate Change Levy is paid at either, or both the:
main levy rate
Carbon Price Support rate
As a business energy supplier you’re responsible for charging the correct levy to your customers.
As an electricity generator you’re responsible for accounting and charging the correct Carbon Price Support rate.
The levy rate varies for each commodity:
kilowatt-hours (kWh) for gas and electricity
kilograms for all other taxable commodities
The rates do not apply to taxable commodities supplied to domestic consumers and charities for non-business use.
Reduced rates
There are reduced rates if you’re already in the climate change agreement scheme.
As a domestic user will I need to pay the climate change levy?
The answer is no.
Exempt Supplies from Climate Change Levy There are exemptions from the main rate of Climate Change Levy. They are supplies:
not for burning or consumption in the UK (exports)
of liquefied petroleum gas and solid fuel intended for re-sale
used in some forms of transport
to producers of taxable commodities other than electricity
to electricity producers (other than combined heat and power stations, small generating stations and stand-by generating stations)
to combined heat and power stations
by small generating stations (other than combined heat and power) used to generate any electricity that’s not self-supplied
not used as fuel
of electricity from good quality combined heat and power stations in some circumstances
for use in metallurgical and mineralogical processes
Excluded supplies A supply is excluded from Climate Change Levy if it is for domestic use or used by a charity for its non-business activities. Domestic users Domestic use includes:
armed forces residential accommodation
caravans
children’s homes
homes for the elderly and disabled
hospices
houseboats
houses, flats or other places of residence (including garages used with them)
religious houses including monasteries and nunneries
school and university residential accommodation
self-catering holiday accommodation
supplies to community heating schemes
De minimis limits for businesses Small (de minimis) amounts of fuel and power may automatically be treated as supplies for domestic use, even where they are supplied to a business using only a small amount of energy. The de minimis limits for each fuel are:
coal or coke - one tonne of domestic grade fuel or less
piped gas - supply is below 4,397 kilowatt hours per month
metered and un-metered electricity - supply is below 1,000 kilowatt hours per month
LPG:
in cylinders - no limit on numbers so long as each one is less than 50 kgs net weight
in bulk where the tank capacity is less than 2 tonnes
Supplies to charities Supplies used by a charity for non-business activities are also excluded from the levy. The levy is due where charities carry out business activities unless the de minimis limits apply. Examples of business activities by charities include the:
sale of donated goods
hiring of charity run buildings (for example, village halls)
provision of membership benefits by clubs, associations and similar bodies
Charities that carry out both business and non-business activities on the same premises can split the consumption per account between excluded and taxable use and advise their energy supplier. The charity will need to provide a VAT certificate to the supplier to claim the relief. Business premises used partly for domestic or non-business charity Where supplies are made to a customer whose premises are put partly to domestic or non-business charity use, if the domestic or charity use is:
at least 60% of the total use, then the whole supply can be treated as such and is excluded from the levy
less than 60% of the total use, then the levy must be applied to that portion that does not qualify for relief
If you do supply fuel and power for a combination of uses you should ask your customer for a VAT certificate that includes what the percentage is, for domestic or charitable non-business use before you apply the relief. Intermediaries If there’s domestic or charitable non-business intermediary in the supply chain, for example, supplies to a tenant via a landlord, the relief depends on the use the commodity will be put to. If the intermediary wants to be excluded from the levy, they will need to submit a Climate Change Levy declaration to their energy supplier which should include the following information:
customers (end users) name and address
confirm that it relates to a domestic or charity non-business qualifying use
the percentage of use eligible for the exclusion of the levy
a declaration that the information is correct and complete and signature
Community heating schemes Supplies to multiple sites for domestic users, for example, a block of flats with a common or shared boiler provided is commonly known as a ‘community heating scheme’. The levy will apply unless the customer:
provides a VAT certificate that covers the community heating scheme
claims relief using form PP11 Climate Change Levy supplier certificate
To claim the exclusion the operator of the scheme must declare to you that the commodities are being consumed for qualifying purposes. Visiting forces If you’re registered for Climate Change Levy, you can make supplies of fuel and power to USA visiting forces without having to account for the levy.
Published 29 December 2016
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