VAT on business energy bills
In this article
Does my business have to pay VAT on gas and electricity?
Can I apply for a reduced VAT rate for my business energy bills?
How do I apply for a reduced rate of VAT?
Does my business have to pay VAT on gas and electricity?
Most businesses are charged VAT at the current rate of 20% for business energy. As your energy supplier, we'll set up your account on the current rate and this will be charged on your gas and electricity bills.
Can I apply for a reduced VAT rate for my business energy bills?
Your business might be eligible for a reduced rate of VAT if any, or all the following circumstances apply
Charity or non-profit organisation
- The proportion of energy used for domestic reasons will qualify for a reduced VAT rate
- If more than 60% of your business energy is used for domestic reasons, the reduced VAT rate will apply to the whole bill
Local authority and free schools
- At least 60% of energy use is used for domestic reasons
- The entire supply will be treated as qualifying for the reduced rate
- Suitable evidence of how the percentage was calculated will need to be provided
Low energy users
- You’re eligible for a reduced VAT rate when your average daily energy use is not more than the HMRC De minimis limit which are:
- Business electricity of 33kWh or 1000 kWh per month
- Business gas of 145 kWh or 5 therms or 4397 kWh per month or 150 therms
How do I apply for a reduced rate of VAT?
Apply for a reduced VAT rate for your business today by logging into your account and completing our online form.
See the HMRC Guidelines for VAT for business
Apply for a reduced VAT rate by email or post
Download and complete our VAT Certificate.
You'll need to provide a separate form for each qualifying property.
Send completed documents
Email your documents to us at businesscustomerservice@britishgas.co.uk
Or post your documents to British Gas, Business Customer Operations, Winnall Down, Alresford Road, Winchester, SO21 1FP
What happens after you submit your VAT self-certification?
We’ll review your certificate in line with HMRC’s requirements. This will take us around 12 working days.
If your application is successful, we’ll apply the reduced VAT rate to your account(s) on your next invoice. We’ll also let you know your updated business VAT status.
If we reject your VAT application or need some more information from you, we’ll get in touch to let you know.
Changes in your VAT status
If you move or change business name, please let us know by completing a new VAT form, so we can update your account(s) and ensure you receive accurate bills.
It's important you let us know so that you remain compliant with HMRC’s VAT regulations.
Frequently asked questions
What is VAT?
Value added tax is a tax levied on all supplies of goods and services to business and non-business customers from a VAT-registered seller.
What types of business are charged a lower rate of VAT?
Charities and non-profit organisations that use part or all their energy for non-business use, businesses that use some or all of their energy for domestic purposes and low energy users - defined as using less than 1,000 kilowatt hours (kWh) of electricity every month (33 kWh a day), or 4,397 kWh of gas (145 kWh a day).
VAT may revert to the default rate - currently 20% - if the business energy use changes.
Some suppliers may be granted VAT relief at 0% where, for example, energy use has been declared for visiting NATO forces.
Does Climate Change Levy apply if my business pays a reduced rate of VAT?
No, you won't have to pay the Climate Change Levy (CCL).
Will one VAT Certificate cover both my gas and electricity?
Yes, if you complete and send a VAT certificate by post and we are the current energy supplier for both fuel types. You'll need to submit separate forms for gas and electricity if you apply online.
Why has my reduced rate VAT application been rejected?
If we’ve rejected your VAT Certificate, we’ll get in touch to let you know the reason why. Here’s some common reasons
- Missing information on the VAT certificate
- Your business is not eligible for reduced VAT
- Information not matching what’s on our systems
- Insufficient evidence provided
- Charity number not recognised
Can I request a VAT reduction by phone?
No, we need a valid VAT Certificate, which you can submit online, or by post to meet our regulatory obligations.
Where can I get help to complete the VAT Certificate?
See paragraph 3.5 of VAT Notice 701/19 on the HMRC website.
Can you back-date my VAT changes if I send a certificate after the qualifying date?
We’ll back bill changes from the date we receive a valid VAT certificate, where required.
For all other customers, we’ll apply the reduced VAT rate from the date we receive a new VAT certificate.
I'm moving out soon. Do I need to complete a VAT Certificate?
You’ll need to complete a reduced VAT application for your current business site. We’ll update your account(s) and back bill charges where required. We’ll back date from the date we receive a valid VAT certificate. We aim to do this within 28 days.
If your new business site qualifies for a reduced VAT rate, you’ll need to submit a new reduced VAT rate application.
Will I need to submit a new VAT Certificate periodically?
Not unless the situation changes. You'll need to submit a new VAT Certificate if:
- The qualifying percentage of gas and/or electricity use changes
- You move premises
- You change energy supplier
Where can I get more information about VAT on business energy?
You can find more information on the HMRC website.
