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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 if you have to provide one. It also provides links to guidance on what counts as a non-business activity.
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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.
To take advantage of the VAT relief your organisation must hold evidence that it is registered with the Charity Commission for England and Wales. If it is not registered with them - for example, if it is exempt from registration with the Charity Commission or is a Scottish or Northern Ireland charity - then it must have evidence that it has been formally recognised as a charity by HM Revenue & Customs (HMRC) for tax purposes.
To enable your supplier to charge you VAT at the zero-rate or reduced rate you must provide him with either:
Find out how to apply for recognition as a charity for tax purposes
Examples of non-business activities include;
Read more about what counts as a business or non business activity in paragraph 4.1 of VAT Notice 701/1 Charities
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.
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:
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.
Supplies of fuel and power that attract the reduced rate of VAT include the following:
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:
For more help you can contact HMRC Charities by phone, email, or post.