There will be a steep 65% increase in effective business energy taxes in the form of the Climate Change Levy rate, as the government aims to push businesses towards greener options and lower energy usage.
The Climate Change Levy (CCL) exists to encourage businesses to cut down on their energy consumption and turn to renewable resources and clean energy to fill any gaps.
The latest hike to the CCL rate is a result of the termination of the Carbon Reduction Commitment Energy Efficiency Scheme, which will come to an end 31 March 2019. Going forward, CCL will be the UK’s sole carbon tax on energy bills.
Businesses who must pay the CCL are in the industrial, public services, commercial and agricultural sectors and are taxed for such commodities as heating, lighting and power. Businesses that are charities with non-commercial activities, nursing homes and low energy businesses are exempt.
Businesses that already boast low energy usage do not have to pay this levy and are identified as ‘domestic customers’. This is determined using ‘de-minimise’ values, which is the value below which items can be imported before taxes and customs charges apply.
Energy sources which are taxable include the following: electricity, natural gas, hydrocarbon gas, petroleum, coal, lignite and coke. The government is actively trying to conserve the consumption of these sources.
In order to avoid paying the levy, your business will have to address how it uses energy and the type of energy consumed. This usually means switching to more energy-efficient equipment, such as new lighting or heating technology or relying on solar and wind energy.
You must consume less than 33 KWh per day or less than 1,000 kWh per month of electricity and less than 5 therms per day or less than 150 therms per month of gas to be exempt from the CCL.
If you are active in energy intensive industries you may be “eligible for receipt of a 90% discount on CCL electricity rates and 65% on CCL gas rates by entering into a Climate Change Agreement (CCA) with the Environment Agency”. By joining the CCA, energy customers agree to reduce energy consumption and CO² emissions. The customer reports their energy usage across a two-year period and if the target is reached within those two years, the discount can be claimed back.
Since April 2017, the new rates of the CCL have been in effect, with the first rise occurring last year. From 1 April 2019, the new 65% rate increase will be applied, making it more important than ever to seek renewable or clean energy sources.