VAT on Electricity for Businesses: How to Reclaim Overpayments and Understand the Climate Change Levy

When it comes to business energy bills, VAT on electricity for businesses and other levies can often be a source of confusion. Many companies don’t realise they may be paying the wrong VAT rate, or misunderstanding additional charges such as the Climate Change Levy (CCL), both of which can lead to overpaying for VAT on electricity for businesses.

In this guide, we’ll explain how VAT on electricity for businesses works, how to spot and reclaim overpayments, and how the Climate Change Levy fits into your bill.

Understanding VAT on Electricity for Businesses

The standard VAT on electricity for businesses rate is 20%, but not every organisation is required to pay this full rate. Some may qualify for a reduced rate of 5%.

You may be eligible for the reduced 5% rate if:

• Your business uses electricity for domestic or mixed use (e.g. a small business operating from a residential property).
• At least 60% of your energy use is for domestic purposes (such as in a care home or residential facility).
• You’re a charity or non-profit using energy for non-business activity.

How to Check If You’ve Been Overcharged VAT

1. Review your recent energy bills
   Look at the VAT rate shown in the bill breakdown. If it’s listed as 20%, but your business qualifies under one of the exemptions, you may be entitled to a lower rate.
2. Check your site type and usage
   If part of your premises includes living accommodation (e.g. a nursing home), or you carry out charitable work, you may qualify for the 5% rate on that portion of your energy use.
3. Contact your supplier
   Suppliers usually apply the standard 20% rate by default. You’ll need to request a VAT Declaration Form from your supplier and provide supporting evidence to apply for the lower rate.
4. Claim a refund
   If you’ve overpaid VAT, you may be able to reclaim up to four years’ worth of overpayments. Refunds are usually issued as a bill adjustment or credit after supplier verification.

The Climate Change Levy (CCL) Explained

The Climate Change Levy is a government-imposed charge designed to encourage businesses to become more energy efficient. It applies to electricity, gas, and solid fuels used by most UK businesses.

Who pays the CCL?

Businesses paying VAT at the standard 20% rate.

Who is exempt?

• Businesses that qualify for the reduced 5% VAT rate.
• Organisations that use onsite renewable energy or have entered into a Climate Change Agreement (CCA).

Example:
A business that signs a CCA with the Environment Agency may receive up to a 90% discount on the CCL, in return for meeting specific energy efficiency targets.

How to Reclaim Overpaid VAT and CCL

If you suspect you’ve been overcharged:

1. Gather your energy bills for the past 12–48 months.
2. Check the VAT rate and whether CCL has been applied.
3. Contact your energy supplier to explain the issue.
4. Submit a VAT Declaration Form if you’re eligible for a reduced rate.
5. The supplier will review your case and, if applicable, process a refund.

If you manage a large or multi-site organisation, this process can get complex. In such cases, working with an energy consultant can ensure you reclaim every penny you’re owed.

How Tritility Can Help

Energy billing is full of small details that can make a big difference. From checking your VAT rate to reviewing CCL charges, it’s easy for errors to go unnoticed, and cost your business money.

At Tritility, we don’t just help understand VAT on electricity for businesses, we also:

• Review and validate their energy bills.
• Identify overpayments and assist with reclaiming VAT or CCL.
• Compare suppliers and secure cost-saving contracts.
• Reduce long-term costs through expert procurement and energy management.

We make business energy simple, and we’ll make sure you’re only paying what you should.

Contact us today for a no-obligation review of your business energy bills or for more information on VAT on electricity for businesses. Just send us your latest invoice, and we’ll do the rest.