In some cases, organisations are paying 20% VAT on energy when 5% may apply.
Applying for 5% VAT is the responsibility of the organisation, not the supplier (who will default to 20% unless consumption dictates otherwise, and even then may still apply 20%. If consumption is borderline, this may only be confirmed at year end).
A reduced VAT rate of 5% may apply if either of the following is met:
1. Low Consumption
Electricity <12,000 kWh per year
Gas <53,000 kWh per year
If usage falls below these thresholds, the supply is treated as “domestic or similar” and billed at 5%
2. Majority Non-Business Use (Most Commonly Charities / Not-for-Profits)
Typically where 60%+ of income is derived from non-business sources (used as a proxy for how the energy is consumed):
rather than trading activities, such as:
If neither applies, suppliers will not accept a change and will charge VAT at 20%
Applying for the reduced rate is the responsibility of the organisation, not the supplier.
Suppliers won’t proactively assess eligibility and will apply 20% VAT unless a clear case is presented.
In most cases, VAT corrections can be backdated for up to 4 years.
This means contacting:
If you believe you clearly meet one of the criteria above:
If you’d like this checked before approaching your supplier, I offer a fixed-fee review (£95) that includes:
VAT is often overlooked. Not because it’s hidden, but because no one is actively checking it.
A quick review can confirm whether you’re correctly billed or whether you’ve been overpaying VAT.
