Did you know, charity energy VAT is paid at 5%, not 20%?
Many UK charities and Community Interest Companies (CICs) are unknowingly overpaying VAT on their energy bills. While the standard VAT rate is 20%, eligible charities should only be paying 5% for energy used in qualifying activities. Understanding and applying this reduced rate can lead to significant savings.
Understanding the Reduced VAT Rate
Charities are entitled to a reduced VAT rate of 5% on energy bills when the energy is used for:
- Charitable non-business activities: Services provided free of charge, such as free daycare for disabled individuals
- Charitable residential accommodation: Facilities like hospices, care homes, and children’s homes
Claiming the Reduced Charity Energy VAT Rate
Energy suppliers do not automatically apply the reduced VAT rate. To benefit, charities must provide their supplier with a VAT declaration form confirming eligibility. This form typically requires details about the nature of your organisation and the percentage of energy used for qualifying activities.
Additionally, qualifying for the reduced VAT rate often exempts your organisation from the Climate Change Levy (CCL), further reducing your energy costs.
Working with a Third Party Intermediary (TPI) makes this process super-simple.
Reclaiming Overpaid Charity Energy VAT
If your charity has been paying the standard 20% VAT rate in error, you can reclaim the overpaid amount for up to four years, supplier depending. This process involves submitting the appropriate documentation to your energy supplier, who will then process the refund.
How Procure Smart Can Assist
At Procure Smart, we specialise in helping charities and CICs navigate energy procurement and VAT compliance. Our services include:
- Reviewing your current energy bills to identify potential savings
- Assisting with the completion and submission of VAT declaration forms
- Negotiating competitive energy contracts tailored to your organisation’s needs
- Providing ongoing support to ensure continued compliance and cost-effectiveness
By partnering with us, you can ensure your charity is not overpaying on energy bills and that all applicable VAT reductions are correctly applied. Speak to us for free, no-obligation discussion.
