Climate Change Levy (CCL) and VAT
The Climate Change Levy (CCL) is a tax which has been applied to the cost of energy consumed by businesses and other organisations since April, 2001. The ideology behind the levy is that users will be encouraged to reduce their consumption if the unit cost of the energy is expensive. Some of the taxes collected are used to help reduce energy consumption and to develop alternative sources of renewable energy.
The UK has agreed to a reduction of greenhouse gas emissions by 12.5% by the years 2008–2012 under its commitment to the Kyoto Protocol. A tax of 5–10% of business energy costs has therefore been applied to encourage organisations to reduce energy consumption. Some of this has been recycled in the form of discounts, enhanced capital allowances and grant support for best practice programmes.
Large energy users are most affected by the tax and as an incentive the government have offered rebates and exemptions on CCL to energy users showing a commitment to reducing energy consumption.
Exemptions from the CCL vary and can provide you with as much as 80% relief
Many organisations will be entitled to partial exemption from CCL. We can lead you through the whole process and can negotiate on your behalf, ensuring you receive the best deal for your organisation.
In order to get partial exemptions, you will be expected to gradually reduce your energy consumption over a period of years. We can help you to set the targets and monitor your performance. Failure to meet your agreed targets can lead to the withdrawal of partial exemptions from the CCL. Hence it is important that you meet those targets.
As of 1 April 2009, Climate Change Levy is charged at a flat rate on each kWh of energy consumed at the following rates:
- Electricity 0.47p/kWh.
- Natural Gas (or other gaseous hydrocarbon) 0.164p/kWh.
- LPG (or other liquid hydrocarbon) 1.05p/kWh.
As per this HMRC publication: www.hmrc.gov.uk/budget2008/bn84.pdf
Some organisations are paying VAT on fuel at the wrong rate. We can audit your energy costs and ensure that you are paying VAT at the correct rate. Sometimes rebates are available if you have been paying VAT at the wrong rate for a number of years.
How we can help?
We will help you to minimise the impact of the Climate Change Levy by
- identifying tax discounts/exemptions;
- arranging free energy conservation surveys;
- helping you to reduce consumption at each of your sites;
- leading you through the application and implementation processes;
- helping you to target and monitor your energy consumption.
We are also in an ideal position to undertake the negotiation of your utility supply contracts, ensuring the application of the optimum rates — both in terms of price and terms of contract.. See our website for case studies detailing how we have helped our clients reduce their expenditure in ways other than energy efficiency.
If you need independent advice on energy conservation, exemptions, reductions in CCL or VAT, or assistance with your energy monitoring and targeting, please email us at info@businesscostconsultants.co.uk or call us on 0141 943 3344.