HMRC has updated this Notice to reflect the new de minimis limits (para 6.1.1).
Tag Archives: VAT-fuel-and-power
VAT Treatment of the Energy Bill Relief Scheme
HMRC Notice 701/19 has been updated to cover payments under the Energy Bill Relief Scheme.
What is the scheme?
This scheme provides a price reduction to help protect all non-domestic customers in Great Britain from excessively high bills.
All non-domestic customers in Great Britain are eligible for this scheme. This includes businesses, voluntary, and public sector organisations (such as charities, schools, and hospitals).
The scheme administrator will compensate suppliers for the reduced prices that they are charging non-domestic customers and there is no need to take action or apply to the scheme as the price reduction will be applied to bills automatically.
The scheme applies to energy usage from 1 October 2022 up to and including 31 March 2023 with savings first seen in October bills.
VAT Treatment
Payments made to suppliers under the scheme are grant payments and outside the scope of VAT. VAT is only due on the amount suppliers actually charge their customers for energy supplied.
Any VAT incurred by suppliers in relation to the operation of the scheme relates to the taxable supply of energy and is therefore recoverable, subject to normal rules.
If changes are made to the scheme in the future, VAT liability may change.
VAT: Fuel and Power Notice updated
HMRC Guidance: Fuel and power (VAT Notice 701/19)
This Notice has recently been updated. It now covers the VAT Reverse Charge measures for wholesale gas and electricity and construction services (Section 2) . There is more information about wholesale gas and electricity and using the VAT domestic Reverse Charge at section 3 of Notice 735: Domestic reverse charge procedure (VAT Notice 735).
Sections 4.1 and 4.3 now include more detail about hydrogen gas.
Brief overview
The reduced rate of VAT of 5% applies to supplies of fuel and power for qualifying use.
Qualifying use means:
- fuel and power for domestic use
- fuel and power for charity non-business use
- fuel and power where the amount supplied does not exceed the small quantities, called the de minimis limits
- fuel and power partly for qualifying use and partly for other purposes, where 60% or more of the supply is for qualifying use
Other supplies of fuel and power in the UK are standard rated.