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Business Energy For Charities

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There is little difference between privately owned businesses and charities in terms of the work they do and the energy they consume. However, registered charities are eligible for certain discounts and tax deductions from HMRC because of their contribution to vulnerable people, society, and the environment.

Charities, non-profit organisations, community centres, and more, are all eligible for various deductions and discounts; the trouble is that not many of these organisations are unaware of the discounts and continue to pay annual fees in the same way as privately owned businesses.

Obtaining gas and electricity discounts from the government or your energy supplier is not only about getting what your not for profit organisation deserves; it's also about making significant savings that can be channelled into the business at a grassroots level.

For more information on how you can save on your charity's energy bills, keep reading - we have everything you need to know below.

Can Charities Save On Business Energy?

Charities contribute significantly to the wellbeing of society by providing key services that support vulnerable people and the environment. So unsurprisingly, charities are exempt from certain charges when it comes to taxation.

You can learn more about what discounts and exemptions your charity could be eligible for at the HMRC website, but one that impacts them all is commercial energy.

No matter what size of charity you run, you will have energy bills in the form of gas and electricity. Even the smallest charities will have these overheads, but they will be exempt from VAT and CCL charges if they fall below a certain threshold. This is not the only way you can receive discounts, but unfortunately, too many charities are unaware of the concessions.

Commercial energy bills can be saved on both VAT and CCL if your organisation has charitable status. VAT, which is normally charged at 20%, can be reduced by a significant 15%, and the CCL, which is normally about 5%, can be eliminated. However, these discounts are not automatic; it will require some knowledge and action on the part of the charity to ensure it qualifies.

Unless charities flag themselves as such, HMRC and energy suppliers will continue to charge these organisations at the standard rates, meaning that businesses with charitable status will overpay their energy bills significantly; the good news is that these overpayments can be reclaimed provided they fall within a four year period. Contact HMRC to confirm if you are eligible for a rebate.

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Which Exemptions Are Charities Eligible For?

When it comes to charity exemptions on energy costs, there's good news and bad news. The good news is that businesses with charitable status can reduce their VAT from 20% to 5% and also make a saving on the CCL by reducing their energy bills by a further 5%.

Unfortunately, the bad news is that most UK charities and non-profits don't realise this and continue to pay their energy bills at a higher rate.

VAT

The first exemption for charities and non-profit organisations is VAT. VAT stands for Value Added Tax, and it's applied to business energy bills as well as domestic supplies. VAT is a tax on the consumption of goods and services rather than income, but in the case of charities, the level of VAT can be significantly reduced.

Qualifying businesses are eligible for a reduction of 15%, down from 20%.

CCL (Climate Change Levy)

The CCL is part of the government's efforts to reduce the national annual carbon output. It's an additional tax levied on gas and electricity for both business and non-business customers.

On top of the standard rate of VAT, customers are required to pay a CCL tax that varies depending on their usage; however, qualifying businesses can be exempt from this tax class.

Which Organisations Qualify For Charity Energy Discounts?

Charities

Registered charities are eligible for tax discounts in the UK, notably, a reduction in VAT and CCL. There are 200,000 charities currently registered in the UK, but not all of them will benefit from the discounts; that's because HMRC and energy suppliers continue to charge at their standard rates unless otherwise notified, meaning that many qualifying businesses go under the radar.

Not for profit organisations

Similarly, non-profit organisations are exempt from VAT and CCL. Not-for-profit businesses are organisations that don't earn money for owners or shareholders. In terms of sales and donations, all the money generated from the business contributes to running the business and achieving its aims.

In this sense, it is much the same as a charity and is also exempt from VAT and CCL.

Community centres

A community centre is a public space where people can meet for group activities, social support, and public information purposes. Like charities, these spaces may also qualify for tax exemption and charitable status.

Community centres are also eligible for a reduction in VAT of up to 15% and an exemption from CCL. However, the correct authority will have to be notified.

State schools

State schools, also known as public schools, refer to public education facilities that educate school students from the ages of 8-18. This education is free, and the schools are funded through the tax system.

As a result, these institutions also qualify for energy discounts in the form of VAT reduction and exemption from CCL. To find out if a school is eligible, visit the HMRC website or contact the energy supplier.

Care homes

Care homes provide a vital function in society, looking after people who need extra support for personal care or assisted living. It's estimated there are around 400,000 care home residents in the UK and around 5500 different care home providers.

Care homes are also eligible for a reduction in energy taxation in accordance with their charitable status. This includes VAT and CCL.

Which Gas And Electricity Expenses Can Charities Pay Less VAT On?

Residential accommodation

Many charities in the UK provide accommodation for those without homes, people living with mental illnesses, those with learning liabilities, and people recovering from abuse or substance misuse.

To protect these vulnerable demographics, accommodation is needed; these residences qualify for reduced VAT for their gas and electricity expenses, as well as a reduction in CCL.

Charitable activities (non-business related)

Any charitable activities that are non-business related also qualify for tax reductions and exemptions. According to HMRC, a non-business activity is a charitable organisation that provides free advice to members, among other things.

Although the advice is provided in a business capacity, it is not classed as a business activity and therefore qualifies for reductions in VAT and exemptions from CCL.

Small scale usage

It's not only charities that benefit from reduced rates on their VAT; if your business has an energy use capacity that falls below the minimum threshold, then it too could benefit from reduced rates on VAT and lower CCL charges.

To qualify, your business must use less than 145kWh or less of gas every day or 33kWh of electricity. Always check your energy usage before committing to a new supplier.

Frequently Asked Questions

Commercial energy customers pay a lower unit cost for energy than non-business customers. This tends to happen because of the volumes of energy involved and the economies of scale. However, business customers can also benefit from reduced rates and tailored solutions unavailable to non-business customers.

The good news is that charities and non-profit organisations can also classify themselves as businesses for tax purposes, provided they are small enough to track their profits. This means they can also benefit from some business-level discounts.

If you're a charity and you think you have overpaid on energy VAT, this can be reclaimed. VAT on energy consumption for the charity sector can be backdated for four years, and the rebate will be returned to you via HMRC or your business energy suppliers. This process is known as VAT relief.

If you have just discovered that you may be eligible for a discount on business energy prices, remember to backdate your claim four years to receive the maximum rebate owed to you - also, take the opportunity to enquire about renewable energy, and visit BEUK for energy-saving tips.

Some energy suppliers are exempt from VAT if the business is a registered charity; this means that although the commercial energy supply is VAT chargeable, VAT and related costs are non-recoverable.

To find out if your business has this status, visit the gov.uk site and fill in their VAT relief form; you can also contact a dedicated account manager to do this for you.