Wrong energy tax whacks charities

Charities are at risk of paying unnecessarily high energy bills due to extra VAT charges

Small charities are paying millions of pounds - unnecessarily - in extra VAT charges and environmental tax on their energy bills, according to price comparison service Make It Cheaper.  

Like households, charities qualify for a reduction in VAT from 20% to 5% on energy used for 'non-business' purposes and exemption from Climate Change Levy (CCL)*, which cuts a further 5% off bills. This include the UK's 200,000 registered charities** plus an unknown number of smaller ones that are not required to register because they fall below the £5,000 per year income threshold, typically: village halls, sports clubs, community centres, Guide/Scout groups and Women's Institutes.

However research conducted by Make It Cheaper among 656 small charity treasurers has revealed that over a third (37%) did not know about the discounts available. Significantly more (58%) were unaware that in order to qualify they are, unlike households, required to sign a declaration form and send it to their supplier. Its findings were as follows: 

  • 37% of treasurers didn't know a reduced rate of VAT and exemption from CCL applies to charity energy bills.
  • 58% didn't know the onus is on the charity to apply for the discounts by signing a declaration form and sending it to their energy supplier.
  • 71% didn't know that only 60% of the energy used needs to be on 'non-business activities' to qualify for the reduced rates on the whole supply.
  • 74% didn't know that rebates for overpayments can be claimed as far back as 2009.

The research uncovered cases where charities have successfully applied for rebates worth thousands of pounds and others where discounts were once applied but have subsequently been withdrawn by suppliers. This has happened as a result of the charity moving premises, changing supplier or its energy consumption rising.(See case studies below)

Jonathan Elliott, founder & CEO of Make It Cheaper, commented:

"No charity should be overcharged and yet it appears to be a common problem when utility companies treat them blindly as businesses. Any treasurer in receipt of bills should always check their VAT rate and also look to see if their unit charges exceed 12 pence per for electricity or four pence for gas. If so, then it's time to take matters in hand." 

The first step for any organisation looking to claim exemptions or rebates is to complete a VAT Declaration form and submit it to its energy supplier for assessment, which normally takes around 14 days. For more information - including the necessary forms for each energy supplier - call Make It Cheaper on 0800 140 4692 or visit www.makeitcheaper.com/CharityVAT.              

- ENDS -

Notes to editor:

* Climate Change Levy is currently charged at 0.541p/kWh for electricity and 0.188p/kWh for gas. http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_InfoGuides&propertyType=document&id=HMCE_CL_001174

** 180,000 organisations are registered with the Charity Commission in England & Wales (www.charitycommission.gov.uk), while 23,000 are registered with the Office of the Scottish Charity Regulator (www.oscr.org.uk).

Case Studies:

  1. Bob Towns at the Royal British Legion in Nairn: "We receive 15% of our supply at 5% VAT."
  2. Claire Brown at St Laurence Church in Reading: "We are in the process of claiming a rebate."
  3. Ann Falconer at the Marton Community Centre in Middlesborough: "I have had a look at our energy bills and we are definitely paying 20% VAT."
  4. Ian Forbes at the Banchory Christian Fellowship Church: "As a charity we were charged VAT at 20% instead of 5%. Felt that the supplier should have ensured this was in place from the start."
  5. Richard Shipman at the Church of St. Mary of Charity in Faversham: "Great problems being charged 20% VAT and environmental charge despite notifying the supplier at least a month before start of contract. It took until June '13 to sort this out from a contract started in October '12!"
  6. Gordon Peden at The Jenniburn Centre in Glasgow: "We have received several thousand pounds in refunds.  The most recent issue related to a change in suppliers and the VAT/CCL status not being carried forward despite our passing on this information at the time of changing contracts. Six months and numerous e-mails/phone calls later it was sorted."
  7. Val Belton at Burpham Village Hall in Arundel: "Until October 2013 we were supplied with electricity with VAT at 20% for the heavy-usage months and 5% for the lighter months, plus the CCL. I've prepared a spreadsheet and calculated that we could reclaim around £900 and that's without the refund of CCL. Since October 2013, we've had a different supplier for our electricity and by my reckoning we could claim about £113 back from them + CCL.  If I can get the refund I hope for our village funds should be over £1,000 better off and I'll earn a few brownie points."
  8. Martin Selby at St Mary's Church in Marlborough: "The VAT rate suddenly changed to the full rate for the bill at the end of last winter, simply because we were using above a certain rate of gas per quarter. Climate Change Levy also imposed. There was no warning or explanation about the change and it was only because I check bills in detail that the 25% increase was spotted and reversed after some phone calls. I also run a church hall for which I am required to calculate how much income comes from charitable donations and how much from "business" without any guidance on how to calculate this allowing for capital expenditure in the past by donations to build the place.  Village / community halls could all have this problem. Why are they trying to lump 'not for profit' organisations with businesses rather than with domestic? Every time I change supplier I have to go through the rigmarole of filling in forms to say we are a charity.  This makes me reluctant to change."
  9. Zane Blanchard at Barsham & Shipmeadow Village Hall in Beccles: "This was the second time that I had need to find a cheaper business energy deal for an organisation with registered charity status - the 'Big Six' really couldn't care less if we were placed on inappropriate business tariffs. I am treasurer for a small village hall in Suffolk but your representative made me feel like the MD of a large company and was able to save us a HUGE amount of money (given that we earn less than £2000 a year from our village hall lets). We were in fuel poverty and things were looking bleak when I received the latest 12 month contract from our provider. Our energy costs had risen by 130% and 200% over two years! Within five minutes I had been given a deal which would save around £500 over 2 years. What a joy - and what a relief - to deal with people who could relieve us of this burden. Make It Cheaper also helped me to save 30% from the gas/electricity charges for the Royal British Legion club of which I am a committee member."

About Make It Cheaper: Based in Central London with 140 staff, Make It Cheaper has been the No.1 destination for businesses & charities to get a better deal on their utilities since it launched in 2007. Following its acquisition of www.UKPower.co.uk in 2012, Make It Cheaper also provides competitive energy prices and expert advice for households - online and via a freephone service. Its supplier panel includes all of the Big 6 and 25 of the smaller domestic and non-domestic energy companies. For businesses & charities it also offers savings across other overheads including: telecoms, insurance and merchant services. The company has appeared in the Fast Track 100 for the past three years and has won the title of 'Consumer Champion' at the Energy Live Consultancy Awards for the past two years. Its 2014 'Net Promoter Score', based on 3,437 customer satisfaction questionnaires completed year-to-date, is +66.

Further information: Nick Heath 020 7654 0730 / 07720 297972 / nick.heath@makeitcheaper.com

Found this page useful?

Help spread the word and share this page with your friends and family on your social networks:

Running your business is about to get a lot easier

Our expert service helps you get on – and stay on – lower, fairer rates for electricity, gas, landline, broadband, merchant services and insurance.

Call us to get started.

0800 970 0077

Prefer that we call you? Just leave your details.

By providing your details you confirm you agree with our terms and conditions and privacy policy