Did you see the ITV News report that up to a third of charities are paying excessive VAT on their energy bills? It is also the case with many churches.
You can claim a reduced VAT charge of 5% on your energy bills and be exempt from the Climate Change Levy (CCL), but it isn't straightforward.
You need to contact your energy company before to fill out a charity VAT declaration form. They can provide you with the right document. If you haven't been getting these discounts, contact your energy company now!
You will be asked if 60% of activities carried are classified as non-business, which in case of the majority of the churches should not be any problem.
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. (source)
Another great thing is thatg if you are paying noremal rate of VAT on your bils at the moment, You will be able to reclaim that for past 4 years!
For example, Church of England has more than 12'000 church buildings. If the ITV's statistic applies to them, that means that about 4'000 churches coiuld save on energy bills.
Acording to Selectra (source) Based on the total number of appliances and the spacial dimensions of each church, energy bills will certainly vary. In the church that we looked at, the total amount of kilowatt hours used on electricity was between 22,000 - 30,000 kWh, which is roughly 9-10 times higher than the average residential household.
We will use the average of 26,000 kWh.
Here is a real example from one of the churches we worked with:
Once we were working with the church that had a 100 adult worshippers on Sundays. Church was thriving and had more and more activities through the week. When we started our work we noticed that they pay full VAT on their energy. We examinde the issue and contacted the energy supplier. Energy supplier provided us with the form to fill and within few days the church was credited overpayments for 4 years in the past.
At the time this church's bill was amounting to over £16 000 per year.
The refund in overpayments was nearly £8 000.
The fallowing year bill went down to just above £13 000.
Now considering it from the perspective of September 2022. Energy prices are going up and the cap does not apply to businesses and charities (although there might be some changes). That means that the same church would with the current rate of energy rather (lets calculate it on the basis of the caps set by government (£0.52 per kWh for electricity and £0.15 per kWh for gas) the same church would/will be now paying nearly £58 000 for a year!
If that church was on 20% VAT rate that would be £66 000!!!
Both quotes are incredible, but one is still £8 000 lower. That is some help.
So, check the bills in your church and act now!