VAT charged on energy bills
VAT Question
My client incurs VAT on electricity that they use in their business. They have read on several websites that VAT incurred on supplies of energy cannot be recovered. At least one such website claims that VAT charged on your energy bills can be claimed when you work from home, but this only applies to energy you used for domestic purposes and not for commercial usage. Is this correct?
VAT Answer
VAT incurred on utility supplies including gas and electricity can be claimed back as Input Tax subject to the normal rules for input tax recovery. Input Tax can be recovered providing that the supply has a direct and immediate link to the taxable activities which are carried out by the business.
Where there is an element of non-business use within the electricity supply, Input Tax recovery should be apportioned using any method which produces a fair and reasonable result.
Where a business makes a mixture of taxable and exempt supplies, Input Tax on the electricity bill can be recovered subject to the partial exemption rules.
If the business uses the Flat Rate Scheme to account for VAT, it cannot claim VAT on the supplies received, as the supply of gas or electricity are not capital expenditure goods for the purpose of the Flat Rate Scheme.
Finally, VAT cannot be claimed back on energy supplies which are used solely for a domestic (i.e., non-business) purpose as there is no direct and immediate link to taxable supplies.
Related VAT Questions
Supply of E-Publications
My client has their own website on which they make sales of e-books, which are downloaded by customers worldwide. My client’s customers are consumers rather than businesses, and these e-books mee
Train Hire for the Purpose of Providing Santa Specials
My client is a historic railway. In previous years they have sold Santa Specials; however, this year a third-party company will organise and sell the Santa Specials to the end customers. My client
Evidence of Zero-Rate Building Services Regarding New Dwelling
My client is a DIY housebuilder and has engaged the services of a building contractor to build the house for them. The contractor is insisting that, in order for him to zero-rate his supplies to my
VAT on Baby Clothes
My client, who sells baby gifts and accessories, has just registered for VAT. Are these zero-rated supplies like children’s clothing? Items sold include baby sized towels, muslin cloths, blankets
Payroll for UK employees going to work overseas and offshore remote workers
We are frequently asked to advise on the Income Tax and National Insurance treatment of UK employees who are being sent to work overseas, and employees who will work remotely from an offshore locat
Supply and Installation of Window Blinds
My client supplies blinds for windows and back in 2021, supplied and installed some blinds to houses at a new housing development before the houses were complete.
Real people, real results
Vantage Fee Protect provide market leading Tax Fee Protection
Insurance schemes through accountants.
Don’t be shy,
get in touch
Vantage Fee Protect provide market leading Tax Fee Protection
Insurance schemes through accountants.
"*" indicates required fields