Business Energy Glossary
What is de minimis on business energy?
De minimis is the UK regulatory threshold below which a business energy supply qualifies for the reduced 5 per cent VAT rate and is exempt from the Climate Change Levy. The thresholds are 33 kWh per day for electricity (around 1,000 kWh per month) and 145 kWh per day for gas (around 4,397 kWh per month). The thresholds are applied per individual supply, not per business as a whole, so a multi-meter site may have some supplies qualifying and others not.
De minimis exemptions are significant. A qualifying supply saves 15 percentage points of VAT and the full CCL charge. For a low-consumption site, the combined saving can exceed £300 to £500 per year against a non-qualifying equivalent. Identifying qualifying supplies and ensuring the supplier applies the reduced rate is a basic part of energy cost management.
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The de minimis thresholds
De minimis is the low-usage threshold below which a business energy supply is charged 5 per cent VAT and no Climate Change Levy, set at 33 kWh a day for electricity and 145 kWh a day for gas. It’s applied per supply, so small sites should check it’s being used.
For the full explanation, see VAT on Business Electricity for UK Businesses.
| Fuel | Daily threshold | Monthly equivalent | Annual equivalent |
|---|---|---|---|
| Electricity | 33 kWh per day | around 1,000 kWh | around 12,000 kWh |
| Gas | 145 kWh per day | around 4,397 kWh | around 52,764 kWh |
The thresholds are average daily consumption across the billing period. A supply consuming 30 kWh per day of electricity in summer and 36 kWh per day in winter has an average of 33 kWh per day across the year and qualifies under the threshold for some periods but may not for others.
Why de minimis exists
The de minimis exemption recognises that very low usage business supplies are effectively domestic in scale. The intent is to align the tax treatment of low-usage supplies with the treatment of domestic supplies (which are not charged CCL and are subject to 5 per cent VAT).
The thresholds were set when the reduced VAT rate for fuel was introduced in 1997 and have remained broadly unchanged. The numbers reflect the upper limit of domestic-equivalent consumption: a household consuming more than 33 kWh of electricity per day, or 145 kWh of gas, would be unusual.
Qualifying for the reduced rate
A supply qualifies for de minimis treatment if average daily consumption is at or below the threshold. The qualification:
- Applies per supply, not per business. A small business with multiple meters may have some qualifying and others not.
- Is reviewed against actual consumption. The supplier reviews the supply against the threshold at periodic intervals (typically annually). The reduced rate applies for periods where consumption is below the threshold.
- Covers both VAT and CCL. A qualifying supply pays 5 per cent VAT (not 20 per cent) and is exempt from CCL (not the standard 0.801 p/kWh).
For most small low-consumption sites (small shops, salons, single-room offices), de minimis applies automatically once the supplier has reviewed the consumption pattern.
Mixed-use supplies
Some supplies serve both qualifying and non-qualifying use. Examples:
- A property with both commercial and residential parts on a single meter.
- A holiday let used part-year residentially and part-year commercially.
- A part-time business operated from a home with a single meter.
For mixed-use supplies, the reduced rate can be applied to the proportion of consumption used for the qualifying purpose. The customer certifies the percentage to the supplier via the VAT Declaration Certificate (HMRC form PP11).
How to claim the reduced rate
For de minimis based on low usage, the reduced rate typically applies automatically once the supplier has confirmed the consumption pattern. For mixed-use or other qualifying bases (charity, domestic), the customer claims via:
- VAT Declaration Certificate (HMRC form PP11). Customer certifies the qualifying basis and the percentage of supply.
- Submission to the supplier. The certificate is sent by email or post to the supplier dedicated VAT certificate team.
- Processing. The supplier applies the reduced rate from the date the certificate is received.
- Confirmation on next bill. The reduced rate appears on the next bill cycle.
The certificate remains in force until the customer notifies the supplier that circumstances have changed.
Backdated claims
Where the reduced rate has been applicable but the supplier has been charging the full rate, HMRC allows backdated reclaims for up to four years from the date of supply. The process:
- Issue a corrected VAT Declaration Certificate covering the historic period.
- Submit to the supplier with a request for backdated correction.
- The supplier processes the correction and issues a credit against future bills or a direct refund.
The four-year limit is set by HMRC under indirect tax rules. Reclaims for periods older than four years are generally not recoverable.
de minimis on business energy FAQs
What is de minimis in business energy?
The UK regulatory threshold below which a business energy supply qualifies for the reduced 5 per cent VAT rate and is exempt from the Climate Change Levy. The thresholds are 33 kWh per day for electricity and 145 kWh per day for gas.
How much energy can I use under the de minimis threshold?
Up to 33 kWh per day of electricity (around 1,000 kWh per month or 12,000 kWh per year) or 145 kWh per day of gas (around 4,397 kWh per month or 52,764 kWh per year). The threshold applies per supply, not per business.
Does de minimis apply per business or per meter?
Per individual supply. A business with multiple meters may have some supplies qualifying for de minimis and others not, depending on the consumption at each meter.
What does de minimis save me?
15 percentage points of VAT (5 per cent instead of 20 per cent) and the full CCL charge (currently 0.775 p/kWh on electricity and gas). For a low-consumption site, the combined annual saving can exceed £300 to £500.
How do I claim de minimis?
For automatic qualification based on low usage, the supplier applies the rate once the consumption pattern is confirmed. For mixed-use or other qualifying bases, submit a VAT Declaration Certificate (HMRC form PP11) to the supplier.
Can I backdate a de minimis claim?
Yes, for up to four years from the date of supply under HMRC indirect tax rules. Issue a corrected VAT Declaration Certificate covering the historic period and submit to the supplier for backdated correction.
What if my consumption is just above the de minimis threshold?
You will pay the full 20 per cent VAT and the full CCL. Reducing consumption to below the threshold (through efficiency measures or operational changes) would bring the supply into qualification.
Is de minimis the same as the VAT reduced rate for energy?
De minimis is one of the qualifying bases for the 5 per cent VAT rate. Other qualifying bases include domestic use, charity non-business use, and supplies to community amateur sports clubs. All produce the same 5 per cent VAT and CCL exemption.