Reduced rate VAT on fuel and power used for charity non-business use

Your charity can pay a reduced rate of VAT of 5 per cent on fuel and power - such as gas and electricity - that you use for non-business activities. It can also pay reduced rate VAT on maintaining equipment connected with the supply.

Broadly speaking non-business activities are those that you don’t make a charge for. If you have premises where you carry out both business and non-business activities, you'll have to provide your fuel or power supplier with a certificate declaring the percentage of each use.

This guide explains whether or not you might qualify for the reduced rate of VAT, and what you have to put on the certificate it you have to provide one. It also provides links to more detail on what counts as a non-business activity.

On this page:

Qualifying for reduced rate VAT on fuel and power
What types of supplies attract the reduced rate of VAT?
Reduced rate VAT on related services
Contacting the HMRC Charities Helpline
More useful links

Qualifying for reduced rate VAT on fuel and power

Your charity will qualify for the reduced rate of VAT on purchases of fuel and power - or on the cost of maintaining equipment connected with fuel and power - where it is used in connection with non-business activities.

You don’t need to be a registered charity to qualify for the relief. If you aren't registered with the Charity Commission, but your charitable status is otherwise recognised by HM Revenue & Customs (HMRC) for tax purposes, then that's sufficient evidence for VAT purposes.

For a more detailed explanation of what counts as a business or non-business activity for VAT purposes follow the link at the end of the next section ‘Find out what counts as a business activity for VAT purposes’. However, generally, if you provide any goods or services and make a charge for them, for example selling greetings cards, you're carrying out a business activity.

In addition, deliveries of certain small quantities of fuel and power will automatically qualify for the reduced rate of VAT. For example electricity supplied at a rate not exceeding 1,000 kilowatt hours a month, or a delivery of not more than 2,300 litres of gas oil whatever the use of the building.

Applying to HMRC for recognition as a charity for tax purposes

If your charity carries out business and non-business activities

If 60 per cent or more of the fuel or power is supplied to you for use in your non-business activities, then you'll pay the reduced rate of VAT on the whole supply. If less than 60 per cent of the fuel or power is for non-business use, VAT will be charged pro rata - that is, at the reduced rate on that portion which is for non-business use, and at the standard rate on that portion which is for business use.

If you have a mix of business and non-business activities, you will need to provide your supplier with a certificate that declares what percentage of the fuel and power supplied is put to non-business use.

The certificate must show:

your fuel or power supplier's name and address
the name, address and - if applicable - VAT registration number of your charity
the address of the premises being supplied - if different to the above
the amount of non-business use expressed as a percentage of the total use - a precise percentage should always be given, don’t say 'over 60 per cent' for example
a signed and dated declaration given by a responsible officer or official of your charity

You should keep a copy of the certificate and related calculations, schedules and any other relevant documents, and must notify your supplier if the calculation changes as you may no longer qualify for the reduced rate.

Find out what counts as a business activity for VAT purposes

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What types of supplies attract the reduced rate of VAT?

Supplies of fuel and power that attract the reduced rate of VAT include the following:

non-hydrocarbon combustible gases such as coal gas, water gases and producer gases
hydrocarbon gases - ie gases consisting wholly of carbon and hydrogen, whether liquefied or not - such as methane, natural gas and Liquefied Petroleum Gas (LPG)
electricity, but not batteries or recharging services or arrangements
fuel oil, gas oil or kerosene - provided they are not supplied for road use, meet the definition for heavy oil, and are either chargeable with excise duty at a rebated rate or are relieved from excise duty
wood, peat and charcoal
firewood
solid fuels such as coal, coke, briquettes, and smokeless fuels, provided they are held out for sale solely as fuel

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Reduced rate VAT on related services

In addition, the following related services can also be charged to you at the reduced rate, as long as they are supplied and invoiced to your charity by your fuel/power supplier:

disconnection and re-connection of the supply and special meter readings at the instigation of the supplier
installation by a supplier of LPG, of a bulk gas tank regarded as essential to the supply of LPG
installation of check meters
installation or replacement of lines and switchgear belonging to the electricity supplier
installation tests and re-tests where required by the supplier to protect their equipment
maximum demand and minimum guarantee charges
removal of damaged coins from meters
rental charges for meters, including secondary meters used by landlords to apportion charges between their tenants
rental of a bulk gas tank in conjunction with the supply of LPG to that tank
repair, maintenance or replacement of equipment and gas pipes or electric cables - belonging to the supplier - up to and including the consumer's meter
replacing a credit meter with a pre-payment meter under the supplier's code of practice, or replacing or re-siting by a supplier of their meter at their instigation
replacement of mains fuses and provisions of earthing terminals
standing charges

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Contacting the HMRC Charities Helpline

For more information you can contact the Charities Helpline on Tel 0845 302 0203 (open from 8.00 am to 5.00 pm, Monday to Friday). Select option 3 for VAT reliefs.