Fuel and power (VAT Notice 701/19)

1. Overview

1.1 This notice

This notice explains how suppliers and users should treat supplies of fuel and power for VAT purposes.

It also tells you how to treat a number of other supplies connected with fuel and power.

1.2 Law

Unless otherwise specified legal references will be from the VAT Act 1994 (VATA 1994).

Under the act supplies of fuel and power are subject to the standard rate of VAT unless they are eligible for the reduced rate under schedule 7A or being exported outside the UK under the conditions set out in VAT on goods exported from the UK (VAT Notice 703).

Find information about the current rate of VAT.

For VAT purposes the supply of heat, power, refrigeration or ventilation is a supply of goods (VATA 1994 schedule 4 paragraph 3). As such the rules surrounding time and place of supply are those associated with goods rather than for services.

2 VAT liability of fuel and power

2.1 Reduced-rated supplies

The reduced rate of VAT applies to supplies of fuel and power for qualifying use. Section 3 explains what qualifying use means.

The following supplies are considered qualifying use:

• fuel and power for domestic use (read paragraph 3.2)
• fuel and power for charity non-business use (read paragraph 3.3)
• fuel and power where the amount supplied does not exceed the small quantities, called the de minimis limits (read section 3 to section 7 of this guidance for the limits on each type of fuel)
• fuel and power partly for qualifying use and partly for other purposes, where 60% or more of the supply is for qualifying use (read paragraph 3.4)

2.2 Extent of the reduced rate

The charges listed here are part of the payment for a supply of fuel and power, provided they are:

• made by a person who supplies the fuel and power to the consumer, up to and including the meter
• charged to that consumer
• inseparable from a supply of fuel or power to that consumer

If the supply is for qualifying use (read section 3) the reduced rate applies to:

• disconnection and re-connection of the supply and special meter readings at the instigation of the supplier
• installation by a supplier of liquefied petroleum gas of a bulk gas tank regarded as essential to the supply of liquefied petroleum gas
• installation of check meters
• installation or replacement of lines and switchgear belonging to the electricity supplier
• installation tests and re-tests where required by the supplier to protect their equipment
• maximum demand and minimum guarantee charges
• removal of damaged coins or tokens from meters
• rental charges for meters, including secondary meters used by landlords to apportion charges between their tenants
• rental of a bulk gas tank in conjunction with the supply of liquefied petroleum gas to that tank
• repair, maintenance or replacement of equipment and gas pipes or electric cables (belonging to the supplier) up to and including the consumer’s meter, (where the supplier’s conduits are within the fabric of a building, reduced rate supplies by the supplier are limited to work essential for getting at the conduits, and making good, all consequential work is standard-rated and contractors’ supplies to the supplier are standard-rated)
• replacing a credit meter with a pre-payment meter under the supplier’s Code of Practice, or replacing or re-siting by a supplier of their meter at their instigation
• replacement of mains fuses and provisions of earthing terminals
• standing charges (read paragraph 10.10)

Any of these supplies are standard-rated when supplied by a contractor other than the supplier of fuel and power.

If a supplier instructs a contractor to send a bill direct to a consumer for work that would have been at the reduced rate if invoiced by the supplier, the contractor must charge the consumer VAT at the standard rate.

Supplies from sub-contractors to suppliers of fuel and power are not eligible for the reduced rate of VAT.

2.3 Standard-rated supplies

These supplies are standard-rated:

• wholesale supplies of fuel and power
• matches
• any road fuel gas or hydrocarbon oil on which excise duty is chargeable (read paragraph 6.1.5 for hydrocarbon oil exceptions)
• hire of mobile generators for operation by the customer
• repairs, maintenance and replacement of pipes not belonging to the fuel or power supplier, normally those on the consumer’s side of the meter
• servicing contracts other than supplies of insurance
• sale of meters to commercial, industrial and domestic consumers for their own use
• altering coin mechanisms of secondary meters
• services in connection with tests carried out, for example, at the request of estate agents or prospective purchasers of premises
• replacement of meters not under the supplier’s Code of Practice and re-siting meters at the request of the consumer
• diverting mains to meet local authority requirements (these supplies are zero-rated when work is carried out in the course of construction of new dwellings) (read Buildings and construction (VAT Notice 708))
• raising or lowering of overhead power lines in connection with the movement of abnormal loads, including escorting the loads (these supplies are zero-rated when work is carried out in the course of construction of new dwellings), read Buildings and construction (VAT Notice 708))
• supply, repair and maintenance of public lighting circuits to local authorities
• temporary floodlighting, emergency or decorative lighting
• charges for playing games such as squash, tennis, billiards and snooker collected by means of a coin-operated lighting meter, that is, a time switch controlling the availability of light for a fixed period of time (may be exempt in certain circumstances) (read Sport supplies that are VAT exempt (VAT Notice 701/45))
• blast freezing
• supplies of electricity for recharging vehicles when using charging points situated in public places

2.4 VAT reverse charge measures for wholesale gas and electricity and construction services

Certain wholesale supplies of gas and electricity are subject to a reverse charge in the UK, this is sometimes referred to as a domestic reverse charge but should not be confused with domestic supplies of gas and electricity. You can read more about wholesale gas and electricity and using the VAT domestic reverse charge at section 3 in Domestic reverse charge procedure (VAT Notice 735).

There is also a domestic reverse charge for building and construction services which may affect you if you carry out or purchase construction services relating to gas and electricity infrastructure. You’ll need to check when you must use the VAT domestic reverse charge for building and construction services. You can also read more about reverse charge treatment for construction works on gas and power infrastructure in VAT reverse charge technical guide.

2.5 Supplies which are outside the scope of VAT

The following charges are outside the scope of VAT:

• replacement by the gas or electricity supplier of dangerous, obsolete or inefficient appliances or parts, after the meter, under statutory contractual obligation (this covers the limited circumstances where the gas and electricity companies undertake work to comply with their statutory contractual obligations to supply fuel and power, it does not cover modification works to gas water heater flues in caravans)
• charges by a gas or electricity supplier for repairs to its own property following damage

2.6 Supplies for which apportionment is required

Where less than 60% of the supply is qualifying use (read paragraph 3.4) and the rest is for other purposes, the qualifying use element is reduced-rated the other use is standard-rated.

2.7 Connecting dwellings and certain other buildings to mains power

With effect from 1 January 2012 the treatment of one-off charges for the first time connection to gas and electricity is as follows:

• if the supply of the connection and provision of the utility is made by the same person (or by members of the same VAT group) the connection charge will follow the treatment of the utility and be reduced-rated
• if the supplies are not made by the same person or if at the time of connection, the supplier of the utility has not been determined, the connection charge will continue to be standard-rated (irrespective of who eventually provides the utility)
• the first time connection of a new dwelling or relevant residential or relevant charitable building to the gas or electricity mains supply is zero rated under group 5 of schedule 8 to the VAT Act 1994 if the connection is made as part of the construction of the building (read Buildings and construction (VAT Notice 708))
• works in connection with the means of providing fuel and power as part of the renovation or alteration of empty residential premises, or of the conversion of premises to a different residential use may be reduced-rated under group 6 and group 7 of schedule 7A to the VAT Act 1994, if performed on the immediate site of the premises (read Buildings and construction (VAT Notice 708))
• grant-funded connection or reconnection to a mains gas supply relating to a qualifying person’s sole or main residence is reduced-rated under Item 4 to group 3 of schedule 7A to the VAT Act 1994, (read Energy-saving materials and heating equipment (VAT Notice 708/6))

All other connections are standard-rated.

2.8 Climate Change Levy (CCL)

The value of a supply for VAT purposes will include Climate Change Levy where appropriate.

The levy is chargeable on the industrial and commercial supply of taxable commodities for lighting, heating and power in the following sectors of business:

• agriculture
• industry
• commerce
• public administration
• other services

Taxable commodities are:

• coal and lignite (brown coal)
• electricity
• petroleum and hydrocarbon gas in a liquid state
• coke, and semi-coke of coal or lignite
• natural gas as supplied by a gas utility
• petroleum coke

The levy does not apply to taxable commodities used by domestic consumers, or by charities for non-business use. Supplies of small amounts of energy (de minimis) are also excluded.

For Climate Change Levy purposes, ‘domestic use’ and ‘charity non-business use’ have the same meanings as in paragraphs 3.2 and 3.3 respectively.

You can find more information on the scope and application of Climate Change Levy in Environmental taxes, reliefs and schemes for businesses.

2.9 Energy bills support schemes and VAT liability of payments

The Energy Prices Bill was introduced to Parliament in October 2022. The government announced support for households, businesses, voluntary and public sector organisations facing rising energy bills in Great Britain (England, Scotland and Wales) and Northern Ireland through 3 schemes:

• the Energy Bill Relief Scheme
• the Energy Price Guarantee
• the Energy Bills Support Scheme

Unless stated otherwise, the schemes apply to energy usage from 1 October 2022 up to and including 31 March 2023 with savings first seen in October bills, typically received in November.

A review by HM Treasury will consider how to support households and businesses with energy bills after April 2023.

Energy Bill Relief Scheme

This scheme provides a price reduction to help protect all non-domestic customers in Great Britain from excessively high bills.

All non-domestic customers in Great Britain are eligible for this scheme. This includes businesses, voluntary, and public sector organisations (such as charities, schools, and hospitals).

Non-domestic customers do not need to take action or apply to the scheme as the price reduction will be applied to bills automatically.

The scheme applies to fixed contracts agreed on or after 1 December 2021, as well as to deemed, variable and flexible tariffs and contracts.

The scheme administrator will compensate suppliers for the reduced prices that they are charging non-domestic customers.

Non-domestic customers in Northern Ireland will benefit from a similar scheme, providing a comparable level of support.

Payments made to suppliers under the scheme are grant payments and outside the scope of VAT. VAT is only due on the amount suppliers actually charge their customers for energy supplied.

Any VAT incurred by suppliers in relation to the operation of the scheme relates to the taxable supply of energy and is therefore recoverable, subject to normal rules.

If changes are made to the scheme in the future, VAT liability may change.

The Energy Price Guarantee

This scheme provides an amount per kilowatt hour (kWh) reduction on gas and electricity bills to help protect all UK domestic customers in Great Britain from excessively high bills.

All domestic customers in Great Britain are eligible for this scheme and do not need to take action or apply to the scheme as the price reduction will be applied to bills automatically.

Households in Northern Ireland will benefit from The Northern Ireland Energy Price Guarantee instead. The scheme provides the same overall benefit as the Energy Price Guarantee. Savings will first be seen in November bills, typically received in December with a payment that covers both October and November, and then continue for 4 months.

Suppliers will be compensated for the reduced prices that they are charging domestic customers.

Payments made to suppliers under the scheme are grant payments and outside the scope of VAT. VAT is only due on the amount suppliers actually charge their customers for energy supplied.

Any VAT incurred by suppliers in relation to the operation of the scheme relates to the taxable supply of energy and is therefore recoverable, subject to normal rules.

If changes are made to the scheme in the future, VAT liability may change.

The Energy Bills Support Scheme

This scheme provides a £400 non-repayable contribution to help domestic customers in Great Britain meet the cost of their energy bills.

All domestic customers with an electricity connection in Great Britain are eligible for this scheme.

The payment was applied to monthly electricity bills for 6 months starting in October 2022.

A similar scheme was established in Northern Ireland, starting on 1 December 2022, providing a comparable level of support.

The scheme does not affect the price of the electricity that the energy supplier is providing to the customer. Payments made under the scheme recognise third party involvement in the supply of energy.

Energy suppliers are required to account for VAT under the normal rules as the payment is made for a taxable supply of energy.

Any VAT incurred by suppliers in relation to the operation of the scheme relates to the taxable supply of energy and is therefore recoverable, subject to normal rules.

If changes are made to the scheme in the future, VAT liability may change.

3. Qualifying use

3.1 What a qualifying use means

Qualifying use means either:

• domestic use (read paragraph 3.2)
• charity non-business use (read paragraph 3.3)

If you apply the reduced rate to supplies of fuel and power incorrectly and cannot satisfy us that you have taken reasonable steps on these points, you may have to pay any VAT that you have undercharged.

This does not apply to VAT treatment of charging of electric vehicles when using charging points situated in various public places. This is always treated as standard rated for VAT, regardless of the quantity of electricity supplied.

3.2 Domestic use

3.2.1 Supplies for domestic use

Supplies of fuel and power for genuine domestic use are eligible for the reduced rate. The provider must be certain that the supply is to a dwelling or certain types of residential accommodation. Examples of allowed residential accommodation are:

• armed forces residential accommodation
• caravans
• children’s homes
• homes providing care for the elderly or disabled, people with a past or present dependence on alcohol or drugs or people with a past oror present present mental disorder
• houseboats
• houses, flats or other dwellings
• hospices
• institutions that are the sole or main residence of at least 90% of their residents
• monasteries, nunneries and similar religious communities
• school and university residential accommodation for students or pupils
• self catering holiday accommodation

The following are treated as part of the same residential unit:

• buildings such as garages used with houses
• subsidiary buildings situated a short distance away, such as a garage in a block located away from a house
• corridors, lifts, hallways and stairways in a residential unit

The following are not considered residential accommodation for the purposes of fuel and power:

• hospitals
• prisons or similar establishments
• hotels, inns or similar establishments

Fuel and power supplies for domestic use in demised areas charged on a meter direct to the tenants of flats or other residential accommodation are eligible for the reduced rate of VAT.

The recharge of fuel and power used by a landlord to fulfil their legal obligations under a lease are a cost to the landlord and not to the lessee or tenants. This includes common areas such as foyers, corridors and stairways, which are not part of the lessee’s own demised area. However, the landlord can recover such costs, including any VAT element, from the lessee or tenant by means of service charge — an extra payment for an exempt supply of residential accommodation provided by the landlord.

Any VAT incurred by the landlord will not be recoverable as it relates to an exempt supply of residential accommodation made by the landlord to the lessee or tenant.

3.2.2 Supplies deemed to be for domestic use

Supplies of certain small quantities of fuel and power, known as de minimis, are always treated as being made for domestic use, even when the supply is to a business customer. These limits are explained in sections 4 (gases), 5 (electricity), 6 (oils), and 7 (solid fuels). Supplies within the limits should be taxed at the reduced rate. You do not need a certificate to apply the reduced rate to such supplies (read paragraph 3.5).

The recharging of electric vehicles, when using public charging points is always treated as standard rated for VAT. This is because these supplies are made at various places such as car parks, petrol stations and on-street parking, not to a person’s house or building.

In addition, these supplies are not usually an ongoing supply to one person where the rate of supply can be calculated.

3.3 Charity non-business use

If a charity does not make a charge, its activities are generally non-business. Supplies of fuel and power for use in such non-business activities are taxed at the reduced rate. You can find further information about charities and their business or non-business activities, in VAT guide (VAT Notice 700) and How VAT affects charities (VAT Notice 701/1).

If you supply fuel and power to a charity that carries out business and non-business activities on the same premises you may need to apportion your supply between qualifying use (read section 3) and non-qualifying use. There is more about this in paragraph 3.4.

3.4 Mixed use

If you supply fuel or power to premises that is partly for qualifying use (read paragraph 3.1) and partly for non-qualifying use, you should charge your customer VAT at the relevant rate on the supplies you make.

If 60% or more of the fuel or power is for qualifying use, you should treat the whole supply as for qualifying use and charge tax at the reduced rate.

If less than 60% of the fuel or power is for qualifying use, you should charge VAT at the:

• reduced rate on that portion which is for qualifying use
• standard rate on that portion which is for non-qualifying use

3.5 Certificates

If you supply fuel and power for mixed use, you should obtain a certificate from your customer that declares what percentage of the fuel and power that you supply to each premises is, or will be, put to a qualifying use (read section 3). Your customer must provide a separate certificate for each supply of fuel and power to separate premises.

The following information should be shown on the certificate:

• your name and address
• your customer’s name, address and VAT registration number
• the address of the premises your supply relates
• the amount of qualifying use expressed as a percentage of the total use, always give an exact percentage
• a declaration given by a responsible officer or official of your customer as to the truth and accuracy of the facts given, this should include:
  • the signature
  • name
  • position of the person giving the declaration
  • the date on which it is made
  • an endorsement that the customer has read and understood the guidance and that they know they must notify the supplier if there is a change in the qualifying use

Supplies for no consideration or for a nominal consideration are normally non-business. Supplies made for remuneration are normally business. 

Suppliers must make reasonable checks on VAT certificates, so customers may need to send the related calculations, schedules and any other relevant documents to their energy supplier. This must also be done within a reasonable time where a supplier takes over an existing customer of another utility. The customer should keep a copy of the certificate and related calculations, schedules and any other relevant documents, to allow this to be done. If the checks are not done, it could result in the full rate of VAT being charged.

Anyone providing an incorrect certificate may be liable to a financial penalty.

4. Gases

4.1 Supplies taxed at the reduced rate

If you supply the following gases for a qualifying use (read section 3), they are liable to VAT at the reduced rate unless you supply them as road fuel:

• non-hydrocarbon combustible gases such as coal gas, water gases and producer gases
• hydrogen piped for domestic combustion
• hydrocarbon gases, whether liquefied or not, such as methane, natural gas and liquefied petroleum gas

This includes only gases which consist wholly of carbon and hydrogen, though minor impurities in a hydrocarbon gas will not affect its entitlement to the reduced rate.

Examples of minor impurities include odorants and low concentrations (10% or less) of renewable combustible gases, such as dimethyl ether.

The following are examples of gases that are liable to the reduced rate:

• acetylene
• coal gas
• methane
• natural gas
• propylene
• butylenes
• liquefied petroleum gas, for example propane or butane
• producer gas
• water gas
• hydrogen piped to domestic premises as a replacement for natural gas

All other gases, whether combustible or not, are standard-rated.

4.2 Supplies of small or de minimis quantities

The following supplies are taxed at the reduced rate:

• supplies of not more than an average rate of 5 therms or 145 kilowatt hours per day, 150 therms or 4,397 kilowatt hours per month of piped gas to one customer at any one of the customer’s premises, this limit applies whether the bill is based on a meter reading, by either the supplier or the customer, or on an estimate
• liquefied petroleum gas not in cylinders, supplied to premises where the customer is unable to safely store more than 2 tonnes
• liquefied petroleum gas in cylinders containing less than 50kg net weight, provided that they are not intended for resale
• liquefied petroleum gas in cylinders where the supply is of no more than 20 of these cylinders

4.3 Standard-rated supplies

Supplies of gas for non-qualifying use are standard-rated, unless the quantity supplied does not exceed the de minimis limit referred to in paragraph 4.2.

The following are examples of gases that are standard-rated, regardless of how they’re used:

• ammonia
• chlorine
• nitrogen
• refrigeration and aerosol gases
• carbon dioxide
• hydrogen for uses other than as piped to domestic premises
• oxygen

But some gases for medical use, including anaesthetics and oxygen in certain circumstances, may be zero-rated or exempt from VAT under the arrangements described in How VAT affects charities (VAT Notice 701/1) or Health institutions supplies (VAT Notice 701/31).

4.4 Road fuel

Supplies of gases for use as road fuel are always standard-rated. VAT is due on the total value, including the excise duty.

4.5 Charged refillable cylinders

When you first sell a refillable cylinder containing gas at the reduced rate, you must account for VAT at the standard rate on the cylinder, which becomes your customer’s property. If you have charged a single price for the cylinder and gas, you must apportion the price between the 2 supplies. You can find information about how to in VAT guide (VAT Notice 700). The price of the cylinder is the difference between the tax-exclusive price of the filled cylinder and your charge for refilling a customer’s own cylinder.

When, for convenience, you exchange a filled cylinder for an empty one of the same size owned by your customer, your refill charge is treated as being wholly for the supply of gas. You can ignore any normal charge made for inspection or maintenance.

4.6 Rented cylinders

On first supply of gas in a rented cylinder, you must account for VAT at the standard rate on any charge you make for the hire of the cylinder. When you take an empty cylinder in exchange for a full cylinder of the same size, you can apply the reduced rate to any refill charge you make, including any nominal charge for inspection or maintenance.

Any charge you make if the cylinder is lost or damaged is outside the scope of VAT. But if you make a separate charge for the retention of a cylinder, it is payment for an additional supply and is standard-rated.

4.7 Disposable cartridges

When gas is supplied in disposable cartridges at an inclusive price covering both the gas and the cartridge, the supply is standard-rated throughout the supply chain until the point of final sale. The reduced rate applies to the supply of disposable cartridges at the point of final sale.

4.8 Bulk storage tanks

Where large containers are installed on customers’ premises the installation normally remains the property of the supplier. It may be a permanent pressure vessel, to be refilled by road tanker or, where either a permanent pressure vessel cannot be installed or a road tanker cannot be used, a large-capacity portable cylinder which has to be exchanged by the supplier. The gas consumed and rental of the tank qualify for the reduced rate, subject to the qualifying use rules. Any supply of repair or maintenance of equipment is standard-rated.

5. Electricity

5.1 Supplies taxed at the reduced rate

Electricity supplied for a qualifying use (read section 3) is subject to the reduced rate.

5.2 Supplies of small (de minimis) quantities

Supplies of not more than an average rate of 33 kilowatt hours per day, 1,000 kilowatt hours per month, of electricity to one customer at any one of the customer’s premises are subject to VAT at the reduced rate. This applies whether the bill is based on a meter reading by either you or your customer or on an estimate.

5.3 Standard-rated supplies

Supplies of electricity for non-qualifying use are standard-rated, unless the quantity supplied does not exceed the de minimis limit referred to in paragraph 5.2.

However, the recharging of electric vehicles, when using public charging points is always treated as standard rated for VAT,  regardless of the quantity of electricity supplied.

5.4 Use of system, transmission and other charges

The supply of electricity for qualifying use is taxed at the reduced rate. Where a price includes a charge for electricity and standing or other charges, the whole supply is taxed at the reduced rate. This will be the case even if you have incurred costs in making that supply that were taxed at the standard rate.

If you make a charge to allow the use of transmission or distribution lines, transformers, meters, or make other similar supplies of services, without any supply of electricity, such supplies are always standard-rated.

5.5 Electricity supplied by mobile generator

If you supply electricity via the use of a mobile generator, the liability of the supply will depend on whether you are hiring out the machine or supplying the electricity yourself.

If you charge for power supplied for a qualifying use (read section 3) and operate the equipment yourself, your total supply is liable to VAT at the reduced rate.

The hire of a generator for operation by your customer is standard-rated.

The supply of the installation of stand-by equipment is standard-rated.

5.6 Batteries

Supplies of batteries by sale or on hire, recharging of batteries or exchanging charged batteries for discharged ones are not supplies of electricity and are standard-rated.

5.7 New electricity trading arrangements

These arrangements have replaced the pool system. Generators, suppliers, and non-physical traders now negotiate bilateral and multilateral contracts ‘over-the-counter’. These contracts are for wholesale supplies of electricity and are standard-rated.

The arrangements provide a mechanism for the settlement of imbalances between physical and contractual positions. The following elements arising from the balancing mechanism are standard-rated:

• balancing mechanism unit cash flow
• non-delivery charges
• energy imbalance cash flow
• residual element cash flow

The information imbalance charges are outside the scope of VAT.

6. Oils

6.1 Supplies taxed at the reduced rate

Supplies of fuel oil, gas oil or kerosene for a qualifying use (read section 3) are subject to the reduced rate, provided:

• you do not supply them as motor or heating fuel for use other than for an excepted machine (see Changes to rebated diesel and biofuels from 1 April 2022)
• they are ‘heavy oil’ within the meaning of the Hydrocarbon Oils Act 1979
• they are either chargeable with excise duty at a rebated rate, or are relieved from excise duty or have special dispensation as listed in paragraph 6.1.5

You will find more about the reliefs available in Get relief for mineral oil put to certain uses (Excise Notice 184A).

Kerosene includes paraffin, JET A1 and AVTUR.

6.1.1 Supplies of small (de minimis) quantities

Although supplies of fuel oil, gas oil or kerosene for a qualifying use (read section 3) are subject to the reduced rate, all supplies of not more than 2,300 litres of fuel oil, gas oil or kerosene are subject to the reduced rate regardless of use. This excludes oils which cannot be reduced-rated under paragraph 6.1, even when used for a qualifying use.

In general, we will regard a supply as comprising all deliveries to one site on one day, this will be the case even if you raise separate delivery notes or invoices. Deliveries that take place on different days, or to different sites, will usually be regarded as separate supplies even if you issue a single invoice for more than one delivery. There will be some exceptions to this.

6.1.2 Examples

The following examples explain these general principles:

(a) A customer has 2 tanks on the same site. You fill both tanks on the same day and raise a separate invoice for each ‘drop’. The amount supplied is the total amount delivered to both tanks. If this amount is above the de minimis limits, your supply is standard-rated.

(b) A customer places an order for 2,000 litres of gas oil but 2 days later, before it is delivered, orders a further 1,000 litres for delivery to a different tank on the same site at the same time. The amount supplied is the total amount delivered to both tanks. Your supply is standard-rated.

(c) You deliver oil to a group of farmers who share a common tank. Each farmer’s part of the delivery is regarded as a separate supply and invoiced separately. Any supply to a farmer below the de minimis limits will attract the reduced rate.

(d) You deliver 2,000 litres of aviation turbine fuel to a small aircraft. The aircraft makes a domestic flight and returns to the same airfield (read paragraph 6.3). You then deliver a further 2,000 litres to the same aircraft on the same day. The deliveries are separate supplies because the second delivery is replacing the fuel consumed since the first delivery. Both supplies are taxed at the reduced rate.

(e) A customer places an order for 2,000 litres of gas oil. Later the same day the customer contacts you again and asks for a further delivery of 1,000 litres to a different tank on the same site. If both deliveries are made on the same day, the total amount of 3,000 litres is regarded as a single supply and is standard-rated. If the orders are actually delivered on 2 different days the reduced rate could apply to both deliveries.

(f) On Monday a customer orders 2,000 litres for delivery to tank A on the following Monday. On Tuesday the same customer orders 1,500 litres for delivery to tank B which is on the same site, on the following Tuesday. The supplier actually delivers both orders on the Tuesday using the same vehicle. The amount supplied is the total amount delivered to both tanks. Your supply is standard-rated.

6.1.3 Consolidation of deliveries

Examples (b), (e) and (f) could involve a consolidation of deliveries by the distribution point. This may occur after the original orders have generated 2 invoices showing VAT at the reduced rate. In circumstances such as these, we will not insist that you reissue the invoices showing the standard rate of VAT. But this treatment will only apply where consolidation occurs unexpectedly or on an unplanned basis. Where it is systematic or frequent, we will expect you to charge VAT at the standard rate.

If you are in any doubt about how this affects your business, you should contact HMRC to agree the correct VAT treatment.

6.1.4 Separate supplies

Supplies of different products, for example, fuel oil and gas oil are always regarded as separate supplies. But supplies of different types of the same product, for example, different grades of kerosene, must not be broken down into each type when considering whether the de minimis limit has been exceeded.

6.1.5 De minimis supplies of heavy oil for private pleasure craft and avtur for private pleasure-flying

Normally VAT is only chargeable at the reduced rate on oils if they are eligible for a relieved or rebated rate of excise duty.

But the following are still eligible for the reduced rate of VAT under the de minimis rules even if they have the full rate of excise duty applied:

• heavy oil (mainly red diesel, which is a gas oil) declared by the customer under section 14E(3) of the Hydrocarbon Oil Duties Act 1979 as being for use as fuel for propelling private pleasure craft
• kersonsene (avtur) declared by the customer under section 13AC(3) of the Hydrocarbon Oil Duties Act 1979 as being for use as fuel for private pleasure-flying

Further information about the relevant declarations can be found in Fuel used in private pleasure craft and for private pleasure flying (Excise Notice 554).

6.2 Standard-rated supplies

Oils described as fuel oil, gas oil or kerosene that do not meet the requirements set out in paragraph 6.1 are standard-rated (read paragraph 6.1.5 for exceptions), as are all other oils such as crude oil, all other heavy hydrocarbon oils and all light hydrocarbon oils, lubricating oils and lubricants. The following are examples of oils that are always standard-rated:

• avgas
• aviation spirit
• bitumen
• black varnish
• coal tar
• creosote
• crude oil
• derv
• kerosene (unrebated)
• liquid lighter fuel
• lubricating greases
• lubricating oils
• methylated spirit (technically this is not an oil)
• paint thinners
• petrol and other light oils such as benzene, toluene, naphtha
• petrol substitutes
• road fuel
• waste oil
• white diesel
• white spirit
• other articles which contain hydrocarbon oil but are not themselves wholly hydrocarbon oil

VAT is due on the total value, including any excise duty.

6.2.1 Excise duty liability of oil

The excise duty liability of oil is determined at the time of its delivery for use or at importation, except for gas oil or kerosene that is marked or granted a marking waiver at remote marking premises. Rebate of duty may be claimed at the time of marking or delivery to an authorised person.

Supplies between or within approved bonded warehouses under duty suspension are disregarded for VAT purposes. You will find more details about this in Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179).

Supplies of other oil fuels for non-qualifying use are standard-rated, unless the quantity supplied does not exceed the de minimis limit referred to in paragraph 6.1.1.

6.2.2 Road fuel

Any heavy oil used as a road fuel is standard-rated. VAT is due on the total value, including any excise duty.

6.3 Fuel for use on foreign-going ships and aircraft

Fuel supplied for use in a foreign-going ship or aircraft is zero-rated. You can find out more about this in VAT on goods exported from the UK (VAT Notice 703).

7. Solid fuels

7.1 Supplies taxed at the reduced rate

The reduced rate of VAT applies to supplies of coal, coke and other solid combustible materials for a qualifying use (read section 3) provided both:

• you hold them out for sale solely as fuel
• they are offered in a form and at a price that is compatible with their being sold as fuel

7.1.1 Supplies of small (de minimis) quantities

A supply of one tonne or less of domestic grade coal or coke that you hold out for sale as domestic fuel is taxed at the reduced rate. The weight limit of one tonne applies to the total delivered weight of all types of such coal or coke you supply at any one time, not to the weight of supplies of individual products, such as lignite, anthracite.

7.1.2 Wood, peat and charcoal

A supply of wood, peat or charcoal that you hold out for sale solely as fuel qualifies for the reduced rate provided that your customer does not intend to resell it. This applies regardless of the amount you supply.

7.1.3 Firewood

Ready-cut pieces of wood of a size suitable for use as fuel such as logs, short waste ends or damaged timber, and held out for sale specifically as firewood maybe sold at the reduced rate. If not sold as firewood they are standard-rated.

7.1.4 Types of solid fuel

The reduced rate applies to the following examples of solid fuels provided they are supplied for a qualifying use and are held out for sale solely as fuel (for example, supplied under a recognised trade description such as singles, ‘coalite’ or ‘phurnacite’):

• barbecue fuels
• briquettes of straw and waste or other combustible material
• charcoal derived from any source (but not if you hold it out for sale as artists’ drawing charcoal)
• coal (including anthracite and lignite)
• coal briquettes
• coal dust
• coke
• firelighters such as wood sticks, impregnated wood products, manufactured items, jelly or semi-solid fire-starters
• firewood, including off-cuts, chips, shavings, scrap or damaged wood and compressed or agglutinated sawdust
• peat blocks, sods or briquettes
• pulverised coal
• smokeless fuel
• solid metaldehyde (solid meths)
• wood logs

We will accept that you are selling coke if the solid fuel is a light porous substance of the residue of coal, lignite or peat. It may go under any of these brand names (this is not an exhaustive list):

• Coalite
• Thermabrite
• Coalite Nuts
• Beacon Beans
• Sunbrite Small Nuts
• Blazeglow

7.2 Standard-rated supplies

Supplies of solid fuels for non-qualifying use are standard-rated, unless the quantity supplied does not exceed the de minimis limit referred to in paragraph 7.1.1.

Generally, solid substances that you do not hold out for sale as a fuel or are unsuitable for use as fuel are standard-rated. Examples are horticultural peat or artists’ charcoal. The following items are always standard-rated:

• any product not consumed in the lighting process, such as pumice blocks, porous pottery, to be soaked in paraffin or methylated spirit, gas pokers and electric hot-air igniters
• artists’ charcoal
• binding agents, such as gum or cement, used to convert coal dust or sawdust into blocks or pieces (although the use of such binding agents in their manufacture does not affect the liability of the items themselves, and the final product may still be treated as fuel if appropriate)
• DIY timber off-cuts and remnants
• coke for use in manufacturing
• filtration charcoal or coke
• forestry thinnings for fencing or staking
• laboratory charcoal blocks
• matches
• peat for use in horticulture or as cattle litter, such as moss and sedge peat
• sawdust, wood chips or shavings for animal litter
• standing trees
• wood for pulping

8. Steam and heated water

8.1 General

Supplies of steam and heated water are not eligible for the zero rate applicable to water. Instead they are, for VAT purposes, a form of heat.

Water that has been heated as part of a treatment process but is supplied at the temperature at which it was before it was heated, that is, after it has cooled down, is not ‘heated water’. Water that is hot because it is drawn from a hot spring is not treated as heated for these purposes. Water that has been deliberately heated by geo-thermal, solar or other natural heat or energy sources is treated as heated.

8.2 Supplies taxed at the reduced rate

Supplies of steam and heated water for qualifying use (read section 3) are taxed at the reduced rate. This applies to supplies of steam or heated water used for heating, personal or other washing, in the kitchen, laundry, and similar purposes.

8.3 Standard-rated supplies

Supplies of steam and heated water for non-qualifying use are standard-rated.

There are no provisions for de minimis supplies of steam or heated water.

9. Ventilation and refrigeration

Supplies of air-conditioning, refrigeration and quick-freezing for a qualifying use (read section 3) are taxed at the reduced rate.

Supplies of ventilation, air-conditioning or refrigeration provided from a central plant are taxed at the reduced rate when supplied for a qualifying use (read section 3).

Where premises are in multiple occupation, any charges to tenants in addition to the rent which are made in respect of the common parts or areas, are treated as further payment for the right to occupy and have the same liability as the main supply. You can find further information in Land and property (VAT Notice 742).

10. Apply the reduced rate to transactions

10.1 Supplies to schools and other educational institutions

Supplies of fuel and power to educational institutions are taxed at the reduced rate if the institution has charitable status and is receiving the supply for non-business use (read paragraph 3.3).

Fuel and power supplied to separate residential premises for the accommodation of pupils and students is taxed at the reduced rate. Where the residential quarters form part of the main building, the supply partly qualifies for the reduced rate (read paragraph 3.4).

You can find further information about the business status of educational institutions in Education and vocational training (VAT Notice 701/30).

10.2 Supplies by wholesalers to retailers

Supplies of fuel and power by wholesalers to retailers are normally standard-rated, unless supplied in small quantities.

10.3 Supplies by shops and other retailers

There are no special rules for supplies by retailers. In practice most supplies of fuel and power by retail, for example, coal supplied in bags will be taxed at the reduced rate because the amount supplied will be below the de minimis limits for that fuel.

10.4 Supplies to landlords

If you supply fuel or power to a caravan park owner or to the landlord, managing agent or residents’ association of accommodation that is used for qualifying purposes, your supply is taxed at the reduced rate. Fuel and power supplied to hotels, inns or similar establishments is standard-rated. The charge should be apportioned if only part of the premises to which the supply relates is used for qualifying purposes, for example, on-site accommodation for employees or proprietors. In all other cases supplies of fuel and power to landlords are standard-rated.

10.5 Supplies by local authorities

10.5.1 Domestic tenants, single supplies of heated accommodation

The supply of accommodation by a local authority is made under a statutory obligation and is a non-business activity for VAT purposes. The VAT liability of any supplies of fuel and power made by local authorities to their domestic tenants as part of the single supply of heated accommodation follows that of the main supply which is one of accommodation. The fuel and power element of the supply, like the rest of the supply, is therefore outside the scope of VAT.

10.5.2 Separate supplies of fuel and power

In all cases of separate supplies for domestic use, the supply by a local authority is one of fuel and power and is liable to VAT at the reduced rate. This is only likely to occur with metered supplies.

10.5.3 Separate supplies to domestic owner-occupiers

Where a local authority continues to supply fuel and power to accommodation it previously owned, it is a business activity. The supply is taxed at the reduced rate if it is for a qualifying use (read section 3).

10.6 Heated, air-conditioned or refrigerated accommodation supplied by landlords other than local authorities

Where you supply fuel and power to tenants in the form of heated, air-conditioned or refrigerated accommodation this will usually be a single supply of accommodation. This accommodation can be used for any purpose: domestic, charitable or business. In practice, heated and air-conditioned accommodation is usually used for residential or office purposes and cold stores are used for storing perishable goods.

Storage with no specific right over land is normally standard-rated. If you grant the user of a cold store a right over land, then your supply is exempt but with the option to tax. Cold storage is not automatically a supply of refrigeration.

10.6.1 A single supply of heated, air-conditioned or cooled accommodation

Where a landlord and tenant contract for a single supply of heated, air-conditioned or cooled accommodation, it is a single supply of accommodation and is taxed as such. If you make a fixed charge for supplies of gas or electricity or include an amount in the rent to cover them, the payment will normally be treated as part of the rent and will be liable to VAT in the same way as the rest of the supply of accommodation.

The tax incurred by the landlord on buying in the fuel or power used to heat or cool the accommodation is the landlord’s input tax, but may or may not be recoverable depending on how the partial exemption provisions apply to the landlord. For example, if the rent charged is payment for an exempt supply, the tax the landlord incurs in making that supply is exempt input tax, and exempt input tax is not recoverable. You can find further information in Partial exemption (VAT Notice 706).

10.6.2 Separate supplies of accommodation and fuel or power

The landlord and tenant may contract for 2 separate supplies, one of heat, air-conditioning or cooling, and the other of accommodation. This is only likely to occur with metered supplies. Where there are 2 supplies, each supply is dealt with separately.

If tenants have coin-operated gas or electricity meters, the money placed in the coin box is payment for a supply of gas or electricity, which is taxed at the reduced rate when made for qualifying use (read section 3). This applies whether the gas or electricity is supplied at cost or with a mark-up. If you rent or own a secondary credit meter, your supplies of gas or electricity are liable to VAT at the reduced rate when made for a qualifying use.

10.7 Service charges for common areas

Mandatory charges for fuel and power used in common areas such as corridors and stairwells in blocks of flats are included in the service charge made to owners of flats or freehold property, form part of the payment for the overall supply. You can find further information about this in Land and property (VAT Notice 742).

Mandatory service charges raised by a local authority to leasehold owners are non-business and outside the scope of VAT.

10.8 Heating contracts

If, under a heating contract, you supply both the fuel and the staff required to operate and maintain the customer’s heating system, the whole of your supply under the contract is liable to VAT at the reduced rate where the heat is for a qualifying use. But if you only carry out maintenance or repairs or replace the plant, you cannot treat such work as part of the reduced rate supply unless it is both:

• covered by an overall contract for the supply of heat
• directly related to and essential for maintaining that supply of heat

If you supply labour or materials for the operation and routine maintenance of a customer’s boiler and distribution system, and your customer obtains fuel from another source, your supply is always standard-rated.

If you have a contract for the installation of a boiler or heat distribution system on your customer’s premises, the supplies of equipment and its installation are standard-rated, unless they qualify for zero rating under the provisions explained in Buildings and construction (VAT Notice 708).

10.9 Facilities requiring fuel and power

The use of washing machines, hot showers and all other facilities including those for playing sport, which depend on temporary power or light and which are charged for by meter, are not supplies of fuel and power. They are supplies of the particular facility concerned and liable to VAT at the appropriate rate.

10.10 Standing charges

Gas and electricity bills include a variable consumption charge and a fixed standing charge. The standing charge represents the upkeep of the pipes and wires required to deliver gas and electricity respectively. But for VAT purposes it is regarded as part of the charge for a supply of gas or electricity, even though it is shown separately on bills.

Where your supply is for qualifying use (read section 3) the whole bill, including the standing charge, is taxed at the reduced rate.

Where your supply is for non-qualifying use the whole bill, including the standing charge, is standard-rated.

Standing charges for gas and electricity are sometimes made by a third party, such as a local authority, rather than the fuel supplier. In these circumstances the standing charge does not form part of the supply of gas or electricity and is standard-rated, regardless of whom the customer is.

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