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Last updated October 2026.
When business energy qualifies for 5 percent VAT
Business energy is standard-rated at 20 percent, with two important exceptions: the de minimis reduced rate, which the supplier applies automatically once usage is below the threshold, and qualifying use, which you claim with a declaration.
| Route | Who qualifies | How it works |
|---|---|---|
| De minimis (low usage) | Any business using on average no more than 33 kWh of electricity a day (1,000 kWh a month) or 145 kWh of gas a day (4,397 kWh a month) at a site | Applied automatically by the supplier where usage is below the threshold on the bill, but check it is |
| Charitable non-business use | Charities and similar bodies, for the proportion of energy used for non-business activity | Requires a VAT declaration certificate to the supplier stating the qualifying percentage |
| Residential or mixed use | Premises with domestic use, such as care homes, student accommodation or live-in business premises | Declaration of the qualifying proportion |
The common failure is the charity route. A village hall, community centre, church, scout hut or small charity office is often fully or largely non-business, qualifies for 5 percent, and pays 20 because nobody filed the form. Declarations also fall away on a switch or renewal and have to be re-filed with the new supplier.
Climate Change Levy: who pays and who does not
The Climate Change Levy is charged per kWh on business electricity and gas and shown as a separate line. From April 2026 the main rate is 0.801 pence per kWh for both electricity and gas, rising to 0.827p from April 2027. It is not charged where the 5 percent VAT rate applies, so every site on reduced VAT is also exempt from the levy.
Beyond that, energy-intensive businesses under a Climate Change Agreement with the Environment Agency pay a reduced rate, currently a 92 percent reduction on electricity and 89 percent on gas, and certain mineralogical and metallurgical processes are exempt for the energy used in the process. Both are claimed by lodging a certificate with the supplier.
Talk it through with us
Send us a recent bill or a quick description of your sites and we will tell you plainly what applies to you and what it would involve. No obligation.
Fixing it and claiming back
VAT overpaid can also be reclaimed through your own VAT return if you are registered, but for charities and small organisations that are not, the supplier rebill is the only route, which makes the time limit matter. The Climate Change Levy guide covers the levy in more depth.
Frequently asked questions
Does my small business qualify for 5 percent VAT on energy?
If a site uses on average no more than 33 kWh of electricity or 145 kWh of gas a day, yes, under the de minimis rule. Charities also qualify for the proportion of non-business use.
Is the Climate Change Levy charged on 5 percent VAT supplies?
No. Energy on the reduced VAT rate is exempt from the levy.
How does a charity claim 5 percent VAT on energy?
By sending the supplier a VAT declaration certificate stating the percentage of energy used for non-business activity. It must be re-filed with each new supplier.
What is a PP11 certificate?
The form used to claim Climate Change Levy relief from a supplier, for businesses under a Climate Change Agreement or using energy in exempt processes.
How far back can VAT overcharges on energy be reclaimed?
Suppliers typically rebill within a twelve-month default; older periods may be negotiable or, for VAT-registered businesses, adjusted through the VAT return within the usual four-year limit.
Can Clearsight Energy check whether we qualify?
Yes. It is a standard part of our invoice validation and renewal reviews, and we handle the declarations with the supplier.
Your questions on this, answered in order
The questions businesses actually ask about this topic, in the order they tend to ask them. Each answer leads to the next; where we can help, there is a link.
Do I have to pay Climate Change Levy and 20% VAT on business electricity?
Most businesses pay the standard 20% VAT and the Climate Change Levy on electricity. The CCL main rate is 0.801p per kWh from April 2026, rising to 0.827p from April 2027. Reduced VAT and CCL exemptions apply in specific cases, including small usage, charity non-business activity and qualifying domestic use, so it’s worth checking your circumstances.
Who qualifies for reduced-rate VAT on business electricity?
Reduced-rate VAT applies to qualifying use, meaning domestic use or a charity’s non-business activities, and to small supplies averaging no more than 33 kWh a day or 1,000 kWh a month. Where at least 60% of use qualifies, the whole supply can be treated as qualifying. You’ll usually need to send your supplier a VAT declaration.
Does the 0% VAT on electricity from October 2026 apply to businesses?
For most businesses, no. The temporary 0% rate from 1 October 2026 to 31 March 2027 applies in Great Britain to electricity for qualifying use, which covers domestic use, charity non-business use and de minimis supplies. So a small site under the electricity threshold pays 0% on electricity in that window rather than 5%, while gas stays at 5%. Standard business supplies stay at 20%. Charities and mixed-use premises should check their VAT declaration is up to date with their supplier.
How do I claim back VAT if I’ve been overcharged on electricity?
Send your supplier a completed VAT declaration showing your qualifying use and ask them to correct the rate. Suppliers can often adjust past bills, typically within HMRC’s four-year limit, though their own processes vary. Keep evidence of your qualifying use, such as charity registration or floor area splits for mixed-use buildings.
Can someone check my business electricity bill for errors?
Clearsight Energy offers bill validation, which compares your invoices against your contract rates, meter reads, standing and capacity charges, VAT and CCL treatment. Common findings include estimated reads, wrong VAT rates and charges carried over after a move. Send us recent bills and the contract and we’ll explain what we find and what can be raised with the supplier. Get in touch →
How far back can I reclaim overpaid VAT on business electricity?
Suppliers can generally correct overcharged VAT for up to four years. If you qualify for reduced-rate VAT, for example through charitable non-business use or domestic use, a missing VAT declaration is a common cause. Once a valid declaration is in place, the supplier can apply the right rate going forward and correct past bills within the limit.
What is a VAT declaration certificate for energy?
It’s a form you give your supplier confirming the proportion of electricity used for qualifying purposes, such as domestic or charitable non-business use. The supplier uses it to apply the reduced VAT rate to that share. It needs updating if your use changes, and suppliers usually have their own version of the form.
Can someone help me submit a VAT declaration and request a correction?
Clearsight Energy can review your bills and use, explain whether a reduced-rate declaration looks appropriate and help you submit it and request corrected bills. You’ll need to confirm the use yourself, as the declaration is your responsibility. Send recent bills and details of how the premises is used. Get in touch →
Who is exempt from the Climate Change Levy?
CCL doesn’t apply to domestic use, charity non-business use or supplies under the de minimis threshold for reduced-rate VAT. Certain processes, such as some metallurgical and mineralogical uses, are excluded. Energy-intensive businesses in eligible sectors can join a Climate Change Agreement for a large discount on the main rate in return for efficiency targets.
What is a Climate Change Agreement?
A Climate Change Agreement is a voluntary scheme for energy-intensive sectors. Facilities that sign up and meet agreed efficiency targets pay a reduced CCL rate, which for electricity is 8% of the main rate from April 2026. Entry is through your sector association, and eligibility depends on the processes carried out at your site.
Can someone run a business electricity quote for me?
Yes. Clearsight Energy can compare suitable contracts across the suppliers on our panel for you. A recent bill helps, though your MPAN, address, current supplier, contract end date and an idea of annual usage are usually enough to start. We’ll set out the options, the term, the rates and the broker fee so you can decide in your own time. Get in touch →
Does renewable electricity avoid the Climate Change Levy?
Not any more. The CCL exemption for renewable electricity, which used Levy Exemption Certificates, ended in 2015. Businesses on green tariffs pay CCL in the same way as everyone else unless another exemption applies. On-site generation you use yourself, such as rooftop solar, isn’t bought from a supplier, so no CCL is charged on that electricity.
Can I get a solar survey for my business premises?
Clearsight Energy can arrange a commercial solar assessment. It looks at roof space and orientation, your half-hourly or annual usage, how much you’d use on site and what you might export. Having your electricity data to hand makes the feasibility figures far more realistic, so it’s worth sharing a year of usage when you ask. Get in touch →
Can I use a domestic electricity tariff if I run my business from home or a flat above the shop?
If you work from home, a domestic tariff is normally fine. For mixed-use premises, suppliers look at how the supply is mainly used. A separately metered flat is domestic, while a single meter serving a shop and flat is usually treated as business. The classification affects VAT, the Climate Change Levy and whether domestic protections such as the price cap apply.
How does a supplier decide if my premises is domestic or business?
Suppliers mainly look at the use of the premises the supply serves. A property used wholly or mainly as a home is domestic, while one used mainly for business is non-domestic. They may ask about business rates, how much of the space is commercial and the type of activity. If your use changes, tell your supplier so the account is correct.
What happens if my premises is on the wrong type of electricity tariff?
The supplier can move you to the correct type of contract, and you may face a revised bill for VAT or CCL differences. It can also change which protections you have. If you think you’ve been wrongly classed as business, provide evidence of domestic use and ask the supplier to review it, including any VAT overcharged.
Does the flat above my shop get the 0% VAT on domestic electricity?
The temporary 0% VAT on domestic electricity in Great Britain runs from 1 October 2026 to 31 March 2027 for qualifying use. A separately metered flat should get it automatically. Where one meter serves both, the qualifying domestic share may be eligible for the relief, usually by giving your supplier a VAT declaration showing the proportion of residential use.
Should I get a separate meter for the flat above my business?
It can make billing, tax treatment and tenancy changes much cleaner, especially if the flat is let. The trade-off is the cost of new wiring and a second meter, plus two standing charges. An electrician can check the wiring, and the network operator and a supplier can arrange the new meter point.
Can someone check my mixed-use property is billed correctly?
Clearsight Energy’s bill validation can check that VAT and CCL are being applied correctly to a mixed-use supply, and that your contract and rates match. Where a VAT declaration is missing or out of date, we can explain what’s needed. Send recent bills and a short description of how the premises is used. Get in touch →
Do I need a business electricity contract for a holiday let?
It varies. Some suppliers treat a holiday let run as a business as non-domestic and expect a business contract, while others will supply it domestically, particularly if it’s also your second home. The choice affects VAT, CCL and contract terms. Ask the supplier how they’d classify it before you sign, and keep the answer in writing.
Can someone run a business electricity quote for my holiday let?
Yes. Clearsight Energy can compare suitable contracts for holiday lets and explain how each supplier would classify the property. Your MPAN, address, usage and any current contract end date are enough to start. We’ll set out the options, the terms and our fee clearly before you decide. Get in touch →
Need help? Get in touch
Call us on 020 8036 5715, or email us, and we will take it from there.