A complete energy guide for charities and what to look out for when buying utilities.
Making sure you pay the right VAT
Charities should pay 5% on VAT on fuel and power if they’re for
- Residential accommodation (for example a children’s home or care home for the elderly).
- Charitable non-business activities (for example, free day-care for disabled people).
- Small Scale use (up to 1,000kWh on electricity a month and 4,397kWh on gas).
If less than 60% of the electricity/gas is for something that qualifies, you’ll pay the reduced rate of VAT of 5% on the qualifying part and the standard rate of 20% VAT on the rest.
What you need to do to get VAT relief?
You need to provide your supplier with evidence that you are a charity.
This can either be
- Your charity registration number
- Letter of recognition from HM Revenue and Customers
Energy suppliers will not necessarily do this automatically and put charities on the correct VAT rates by default. It is worth checking your historic energy invoices to ensure you are paying the right amount. And remember you can claim any overpayment for the last 4 years.
Ensure you are not paying out of contract rates or too much undisclosed broker commission
Over the last 20 years, I have seen countless charities fall onto out of contract rates and variable tariffs. These prices are typically 40% more than a fixed contract.
At Onwards, we ensure that no charity ever falls onto expensive variable tariffs. We constantly monitor market prices, looking for opportunities to renew and proactively manage the renewal process.
Although energy brokers and consultants are great at searching the market and renewing your contract, many still fail to declare their commission fees or make it clear. We recommend you use an energy partner who;
- Comply with Ofgem’s voluntary principles – more information can be found on their website at https://www.ofgem.gov.uk/ofgem-publications/83822/481tpifacsheetmay15web-pdf
- Fully disclose their commission fee and the services it covers