UK VAT Overview

Two rates of VAT, referred to as standard rate VAT and reduced rate VAT, are applicable to energy related charges in the UK. Domestic (i.e., residential) customers always pay VAT at the reduced rate. Non-domestic customers on the other hand normally pay standard rate VAT. However, part or all of the energy related charges for a non-domestic customer might be subject to reduced rate VAT. De minimis and VAT declarations affect the percentage of the energy related charges that is subject to each VAT rate:

• If average daily usage at a premise for a given service type does not exceed a certain threshold (the de minimis limit), all energy related charges at that premise / service type are taxed at the reduced rate.
• Some non-domestic customers, such as those with a mixed-use premise, may be eligible to pay reduced rate VAT on part or all of their energy related charges. Customers may file a VAT declaration specifying the percentage of their energy related charges that are eligible for reduced rate VAT - refer to Maintaining Declarations for more information. If the declared percentage exceeds a given threshold, the declared percentage is deemed to be 100% and the customer pays VAT at the reduced rate on all energy related charges at that premise. VAT declarations are non-transferable and must be filed for each account, premise, and service type combination.

In addition to the potential for different rates of VAT to be applicable on a bill, UK tax regulations require that excess credits are considered a prepayment of energy related charges together with VAT. Refer to Excess Credits and UK VAT for more information.

The system comes supplied with various algorithms types that can be used to perform the VAT calculations.