VAT on gas, oil and electricity
Russell Moore, the RYA’s retained VAT expert has warned that clubs are being contacted by cost saving consultants who are suggesting that clubs are paying too much VAT on fuel and power costs and that, for a fee, they can help them reduce their costs with the added benefit of avoiding the need to pay Climate Change Levy (CCL). This is highly unlikely to be the case as the VAT rules for reducing the VAT rate charged are extremely restrictive and strictly only apply to a registered charity for what is termed as ‘non-business use’ or in certain circumstances of very low usage deemed domestic use.
The position is that unless the quantities of electricity, gas and oil are sufficiently low to be considered as domestic then no relief applies. And whilst some clubs are indeed registered charities, even charitable sailing clubs use the clubhouse premises, be it changing/shower rooms only or including a bar/function area, for what are termed as ‘business’ purposes. This is primarily the supply of making the clubhouse facilities available as a supply of facilities and advantages to members in return for their subscriptions which is a business activity for VAT purposes. Accordingly, the charity relief does NOT apply.
This being so, the only possible relief is where usage is extremely low and deemed to be at domestic use levels.
The maximum use which HMRC say constitutes domestic use, which does qualify
- Piped gas – not more than 4397 kilowatt hours per month
- Electricity – not more than 1,000 kilowatt hours per month
- Oil – A single supply of 2,300 litres of fuel oil
So if your usage is under these levels then you can confirm that the supply should be at the reduced 5% VAT rate and CCL does not apply, otherwise it does not qualify and VAT is payable at 20% and the CCL due
Read the HMRC guidance on this issue
Any club unsure how these rules apply to them or would like to discuss this issue in greater detail should contact Russell Moore russellmoore@sportsvat.co.uk | 07710 329317.