The Climate Change Levy (CCL) is an environmental tax imposed by the government on taxable commodities as a cost signal to reduce carbon emissions.
Businesses that pay the standard rate of VAT (20%) are charged CCL on their energy bills, although there are exceptions. Businesses that meet the minimal use requirements and are charged the reduced rate of VAT (5%) don’t pay CCL.
The main rate of CCL is applied to business in the following sectors:
- public services
The CCL rates changed from 1st April 2021. This is due to the Government rebalancing the rates to reflect the lowering carbon impact of electricity in comparison to gas consumption. This means that gas CCL rates will continue to increase, whereas electricity CCL rates will continue to decline, with the aim for the charges to be at a 1:1 ratio by 2025.
From April 2021 businesses on the main rate will pay:
- £0.00775 per kilowatt hour (KWh) for electricty
- £0.00465 per KWh for gas
- £0.02175 per kilogram (kg) of liquefied petroleum gas (LPG)
- £0.03640 per kilogram (kg) for any other taxable commodity
This suggests, a small business with an average annual usage of 15,000 – 25,000 KWh may expect an additional yearly charge of £116.25 to £193.75 on electricity according to the 2021 CCL rates. This is a 4.44% decrease for electricity but 14.5% increase for gas on 2020. However, businesses that enter into a climate change agreement with the Environment Agency receive a 92% discount on electricity, 83% discount on gas, 77% on LPG and 83% on any other taxable commodity.
Further information can be found on the UK Government website here.