Non-domestic energy consumers need to pay taxes on gas and electricity they consume. Most businesses need to pay a 20% VAT but certain types of organisations, such as care homes, qualify for a reduced VAT rate. That means that care homes should be paying only 5% for their energy provided that they use it for non-business purposes. If part of their supply goes to non-business purposes and another part to business ones, they can still get the 5% VAT but only for the relevant portion of their supply. As well as being able to claim the reduced VAT rate, care homes can get exemption from paying CCL. In this guide, you can find all the information you need about VAT reductions and CCL exemptions for care homes.
How can care homes get reduced VAT
Certain types of non-domestic energy consumers in the UK that use energy for charitable purposes can get reduced VAT rates. These are:
- Charities
- Non-profit organisations
- Small businesses that consume less than 4,397 kWh of gas or 1,000 kWh of electricity per month.
Care homes fall under the non-profit category so instead of being treated like any other business client, they should be paying 5% VAT. However, as a care home owner, you have to be aware of the fact that this discount applies to energy used for non-business purposes. So, to get the reduced VAT rate, you need to prove that the activities performed at your facility serve to help others rather than to make a profit.
If you receive money in the form of donations, you operate on grants, or you provide services for free, you can also get the 5% VAT.
Care homes that use energy for both non-business and business activities, can get the reduced VAT on the entirety of their supply if they use 60% or more for non-business things. If they use less than 60% for non-business activities, they will pay 5% VAT for the part of the supply used for charitable purposes and 20% VAT for the rest of the supply.
To claim your reduced VAT rate, you will need to provide a certificate showing how much gas and electricity you use for non-business and business activities respectively.
What is CCL
CCL is an environmental tax that business energy customers in the UK have to pay. The tax was introduced by the government to lower gas emissions and encourage companies to be more sustainable.
How much each business needs to pay differs as CCL is determined based on their monthly consumption. CCL is paid only for used units of certain commodities, not all parts of the energy bill. These units are expressed in kWh. CCL rates change every year on 1 April (they typically increase each year).
As of 2022, the rates are:
| Rates after 1 April 2022 | |
| Electricity | £0.00775 per KWh |
| Gas | £0.00568 per KWh |
| LPG | £0.02175 per kilogram |
If your care home uses energy mainly for business purposes, you will have to pay the CCL. If, however, you mainly use your energy supply for charitable activities, you do not have to pay anything.
How can care homes get CCL exemption
Companies that pay the standard 20% rate have the legal obligation to pay CCL too. However, organisations that qualify for the reduced VAT rate are automatically exempt from paying it. This is because CCL is not charged for energy used for domestic or charitable purposes, as well as activities that are offered for free.
Activities that can qualify your care home for the CCL exemption include:
- offering accommodation to elderly, disabled, or children
- providing palliative care
- operating as a hospice
- serving as a mental health facility.
Many care homes are not aware of the fact that they do not have to pay the CCL and they find themselves overpaying for their supply. Luckily, you have the right to claim overpayments from up to four years ago.
How can care homes claim the reduced VAT and CCL exemption
The first thing you should do is check your energy bills to find out what VAT rates you are paying and whether CCL is also listed on your bill. If you realise that the VAT rate is 20%, it means you have been paying too much.
To apply for the reduced VAT rate for your care home, you have to fill out a VAT Declaration form. You need to ask your energy supplier to give you one. You have to be aware of the fact that suppliers automatically charge all clients, including care homes and charities, the standard rate. This is why it is very important that you check your bills and undertake steps to correct any issues.
How can Energy Solutions help my care home?
Knowing who is eligible for reduced VAT and CCL waiver can help your organisation save money and improve your energy efficiency. Understanding how these taxes work and how to claim reductions can be complicated but Energy Solutions can explain everything to you. We can provide you with all the information you need about these taxes and requirements to be able to claim reductions and exemptions. We can also assess whether your care home is eligible.
If you realise that you have been overpaying for these taxes for a while now, we can help you claim the overpayments and get your money back. We are committed to helping energy consumers save money on their supply.
Other organisations that can enjoy reduced VAT rate and the CCL exemption include nunneries, community centres, student accommodation, sports clubs, NGOs, boarding schools. These are just some examples, however. So, if you do not run a care home but you have another type of organisation that uses energy for non-business purposes, we can help you claim your reductions too!
If after claiming your reductions and exemptions, you think your bills still are too high, it might mean that you need to switch energy suppliers. As an experienced energy broker who works with numerous UK suppliers, we can help you find the cheapest deal on the market. We can also handle all the paperwork for you, making the process of switching energy providers effort-less.
If that sounds good, give us a call on 0131 610 1688 or send an email to nick@energybrokers.co.uk. We would love to hear from you and tell you more about the services we offer.