HMRC launch letter campaign to energy suppliers on reduced VAT rate errors

22 September 2023| CATEGORIES: domestic fuel, HMRC campaign, reduced VAT rate| TAGS: de minimis test, energy suppliers, HMRC campaign, reduced VAT rate

HMRC have launched a ‘one-to-many’ letter campaign aimed at energy suppliers, regarding the reduced VAT rate for supplies of fuel and power.

Reduced VAT rate on de minimis supplies

The legislation for the reduced rate of VAT on supplies of domestic fuel or power is found at Group 1, Schedule 7A, VAT Act 1994. The reduced rate applies to supplies of ‘de minimis’ amounts of energy.

The HMRC VAT Fuel and Power internal manual (VFUP) stipulates that the de minimis limit must be considered independently for each premises. Where there are multiple meters used in a single premises and the supply of fuel and power is to one customer, the meters must be aggregated before applying the de minimis test for VAT purposes.

Information requested by HMRC

HMRC are asking that suppliers review their systems and processes for accounting for VAT, to ensure they are accounting for VAT in line with HMRC’s guidance (VAT Notice 701/19 and the VAT Fuel and Power Manual).

The letter requests that businesses notify them if any reduced rate supplies of fuel and power have been made in the past four years due to the supply meeting the de minimis test. If any mistakes have been made these should be corrected.  HMRC have asked businesses to confirm within 45 days that the relevant checks have been made and to notify them of any errors corrected and/or improvements made.

A copy of the letter is available here.

Please get in touch if you have received one of these letters and require assistance.