Climate Change Levy

Climate change levy: Exemption from a rising stealth tax

Posted by Sell My Group in Park Home and Holiday Home News, October 3, 2017

For over five years I have been advising holiday parks on a free way to instantly lower their energy bills without having to switch suppliers.

This is a simple DIY process and payments often appear in your account within a few months or even days with refunds averaging £8501.

Climate change levy is a tax applied to your energy bills which was introduced in April 2001 as part of the Finance act at the turn of the Millennium. The aim of this tax was to cut annual emissions in the UK by 2.5 million tons by 2010.

CCL is currently charged 0.6 pence per unit of electricity your park uses; the charge also applies to bulk LPG and natural gas at a different rate.

The majority of businesses in the UK are exposed to the tax – however there is a special Climate levy exemption which generally applies for UK holiday parks.

A looming problem

Originally most of the environmental tax burden was applied to large carbon emitters via the carbon reduction commitment (CRC).

Then George Osborne announced the CRC was due to be scrapped in 2019 as it was deemed too complicated. At the time there was an outcry about a hasty decision, especially as the taxation is now to be shifted right across business energy users in the UK via a marked hike in CCL rates on business energy bills.

2019 tax hike

The impact on CCL and ultimately your energy bill will be that because the CRC will be phased out CCL will rise markedly to almost one penny per unit – in the case of electricity that could represents around 8% of your total energy bill, however it is very possible to reclaim these charges for a maximum of four years. Even better news is that moving forwards your park could be completely exempt from climate change levy.

How to claim reclaim CCL

In my experience many holiday parks have claimed quickly so the exercise is well worth doing, with minimal paperwork to worry about. Here are a few simple tips to make applying for a climate change levy exemption a painless proposition.

The majority of holiday parks are classed as ‘mixed use’ businesses for VAT on energy purposes. That means that some components on site are classed by HMRC as the ‘domestic’ for VAT purposes – static units for holiday use, shower blocks and launderettes used by guests are classed as domestic components.

For the sake of this exercise let’s assume that 80% of the site served by the electricity meter or indeed a bulk LPG supply tank is comprised of these components with the other 20% comprising an office premises and other buildings used purely for business purposes.

Everything hinges on your VAT rating for your energy supplies. So if over 60% of the site supplied comprises ‘domestic’ rated components as described above then the whole supply is 100% exempt from the levy.

So with a successful claim we can realize an approximate real reduction in energy cost of 8% both moving forwards and retrospectively (for a maximum reclaim period of four years).

The process

  • Ask your ask your supplier for a VAT declaration form
  • Fill-in the fact declaration form stating writing a note on the form stating that you are a mixed use business for VAT purposes
  • Write to the approximate percentage of domestic rated and business rated components so in our example if over 70% of the site comprises caravans or similar dwellings for holiday use and the rest is business use only indicate this in the appropriate box on the form. There is also a HMRC version of the form which you can find this by searching
  • PP11 online, although I recommend you use the specific supplier form for ease of application.
  • Remember to send your VAT declaration form directly to the supplier and not to HMRC

Different suppliers, different rules

Whilst some suppliers are keen to help the customer by refunding over payment (Eon being a prime proactive example) other suppliers are not so helpful, which is rather shortsighted in my opinion.

Suppliers are only obligated by law to start dealing with your declaration within five working days of receipt, but they have no obligation to actually make a refund or reduction. That will depend on their individual policy, something to bear in mind next time you are considering your choice of future electricity, gas or LPG supplier.

The PP10 form

Once you have qualified for the appropriate reduction of VAT on your energy bills you must make HMRC aware of this change by submitting a PP 10 form directly to them.

A simple process

Whilst this may initially seem complicated the process is actually very fast. You do not need multiple copies of multiple site bills to accompany the VAT declaration, simply state the supply number that the VAT declaration applies to. The whole application is free to do and will only take a matter of minutes. Beware of anyone that implies the exercise is more complicated than it actually is. There are certain companies out there who derive profit from acting as a Third Party Intermediary, although I have had requests to deal with the application for certain busy customers I would encourage Finance Directors to apply direct.

Key facts

  • You are applying for a VAT reduction from full rate to the lower rate.
  • This can be applied to electricity, natural gas and large bulk tank LPG supplies.
  • Rates vary depending on the nature of supply i.e. electricity has a higher rate of CCL attached than natural gas

A rising expense

The current 2017 rate for electricity rounds up to 0.7 penny. In 2019 it will round up to 0.9 – almost one full penny levied on every unit used over the De Minimis level of 12000 units per annum.

Notably LPG will rise from the current rate in 2017 of 0.1 up to 0.2 pence per litre (rounded up) in 2019, effectively doubling.

We can now see that the vast majority of businesses will be adversely affected by the climate change levy rate increase. Please take this opportunity to examine your options as a holiday park.

Further reading

Inevitably and there are further detail questions that should be discussed thoroughly.

This is a guest blog by Adam Beckett, who is as specialist in holiday park ccl exemption advice.