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 if you have to provide one. It also provides links to guidance on what counts as a non-business activity.

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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.

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:

  • your Charity Commission registered charity number
  • evidence that you have been formally recognised by HMRC as a charity for tax purposes

Find out how to apply for recognition as a charity for tax purposes

What’s a non business activity?

Examples of non-business activities include;

  • receiving income from purely voluntary donations where nothing is given in return
  • receiving grant funding
  • activities where your organisation doesn’t make a charge

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 your charity carries out both 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 about VAT for charities: introduction

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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 - that is 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 HMRC Charities

For more help you can contact HMRC Charities by phone, email, or post.

Contact details for HMRC Charities

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More useful links

Find out more if you're supplying gas and electricity to a charity

Find out more about supplies of fuel and power for VAT purposes in VAT Notice 701/19

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