VAT on business energy bills

Does my business have to pay VAT on gas and electricity?

Most businesses are charged VAT at the current rate of 20% for business energy. As your energy supplier, we'll set up your account on the current rate and this will be charged on your gas and electricity bills. This applies to all British Gas business and British Gas Lite customers.

Can I apply for a reduced VAT rate for my business energy bills?

Your business might be eligible for a reduced rate of VAT if any, or all the following circumstances apply

Premises used partly for residential accommodation and business purposes

The proportion of energy used for domestic reasons will qualify for a reduced VAT rate
If more than 60% of your business energy is used for domestic reasons, the reduced VAT rate will apply to the whole bill
If the premises are used only for charitable non-business purposes, the reduced rate of VAT will apply.
If premises serve a mixture of business and non-business purposes, the charges can be split between business (20% standard rate VAT) and non-business (5% reduced rate VAT).
If more than 60% of the energy is for the non-business element, the entire supply will be subject to VAT at the reduced rate

Local authority and free schools

At least 60% of energy use must be for domestic purposes. This includes heating, cooking, and lighting
If domestic energy use exceeds 60%, the entire supply qualifies for the reduced VAT rate.
Suitable evidence of how the percentage was calculated will need to be provided

Low energy users

You’re eligible for a reduced VAT rate when your average daily energy use is not more than the HMRC De minimis limit which are:
- Business electricity of 33kWh per day or 1000 kWh per month
- Business gas of 145 kWh per day or 5 therms or 4397 kWh per month or 150 therms

How do I apply for a reduced rate of VAT?

Apply for a reduced VAT rate for your business today by logging into your British Gas business or Lite account and completing our online form.

See the HMRC Guidelines for VAT for business

What happens after you submit your VAT self-certification?

We’ll review your certificate in line with HMRC’s requirements. We'll aim to do this within 28 days.

If your application is successful, we’ll apply the reduced VAT rate to your account(s) on your next invoice. We’ll also let you know your updated business VAT status.

If we reject your VAT application or need some more information from you, we’ll get in touch to let you know.

Changes in your VAT status

If you move or change business name, please let us know by completing a new VAT form, so we can update your account(s) and ensure you receive accurate bills.

It's important you let us know so that you remain compliant with HMRC’s VAT regulations.

Frequently asked questions

What is VAT?

Value added tax is a tax levied on all supplies of goods and services to business and non-business customers from a VAT-registered seller.

What types of business are charged a lower rate of VAT?

Charities and non-profit organisations that use part or all their energy for non-business use, businesses that use some or all of their energy for domestic purposes and low energy users - defined as using less than 1,000 kilowatt hours (kWh) of electricity every month (33 kWh a day), or 4,397 kWh of gas (145 kWh a day).

VAT may revert to the default rate - currently 20% - if the business energy use changes.

Some suppliers may be granted VAT relief at 0% where, for example, energy use has been declared for visiting NATO forces.

Does Climate Change Levy apply if my business pays a reduced rate of VAT?

No, you won't have to pay the Climate Change Levy (CCL).

Will one VAT Certificate cover both my gas and electricity?

If you're a Lite or British Gas business customer, you'll need to submit separate forms for gas and electricity when you apply online.

Why has my reduced rate VAT application been rejected?

If we’ve rejected your VAT Certificate, we’ll get in touch to let you know the reason why. Here’s some common reasons

Missing information on the VAT certificate
Your business is not eligible for reduced VAT
Information not matching what’s on our systems
Insufficient evidence provided
Charity number not recognised

Can I request a VAT reduction by phone?

No, we need a valid VAT Certificate, which you can submit online.

Where can I get help to complete the VAT Certificate?

See paragraph 3.5 of VAT Notice 701/19 on the HMRC website.

Can you back-date my VAT changes if I send a certificate after the qualifying date?

We’ll back bill changes from the date we receive a valid VAT certificate, where required.

For all other customers, we’ll apply the reduced VAT rate from the date we receive a new VAT certificate.

I'm moving out soon. Do I need to complete a VAT Certificate?

You’ll need to complete a reduced VAT application for your current business site. We’ll update your account(s) and back bill charges where required. We’ll back date from the date we receive a valid VAT certificate. We aim to do this within 28 days.

If your new business site qualifies for a reduced VAT rate, you’ll need to submit a new reduced VAT rate application.

Will I need to submit a new VAT Certificate periodically?

Not unless the situation changes. You'll need to submit a new VAT Certificate if:

The qualifying percentage of gas and/or electricity use changes
You move premises
You change energy supplier

Where can I get more information about VAT on business energy?

You can find more information on the HMRC website.

Back to Billing & payments