Guide to the Climate Change Levy for Businesses
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When you receive your business energy bill, you may notice a charge called the Climate Change Levy (CCL).
Businesses may not be aware that there are ways to reduce these charges. In this guide, we explain what the CCL is and how much it costs.
The Climate Change Levy is an environmental tax on commercial energy use in the UK. It is an additional tax, alongside VAT, that certain businesses will pay on their energy.
The UK government introduced the Climate Change Levy as part of a wide array of legislation to reduce greenhouse gas emissions. However, it is an energy tax rather than a carbon tax. Alongside CCLs are Climate Change Agreements (CCAs). These enable businesses to get a reduced rate by committing to improve their energy consumption.
The UK government aims to motivate companies to become more energy efficient. This will be required for the UK to meet the current 2050 targets of net-zero greenhouse gas emissions.
Most businesses will be required to pay the main rates of the CCL.
However, there are some exceptions to this. A business may be exempt or entitled to reduced rates if they are:
You will also be exempt from paying the CCL if:
There are steps businesses can take to reduce their CCL charges. Energy-intensive businesses can commit to a Climate Change Agreement. This is a voluntary commitment to reducing energy and carbon usage.
The amount that businesses will pay for the CCL is set by the government and varies each year. The rate will be the same across all business energy suppliers.
The CCL rate for the 2020 to 2021 financial year is:
Like with VAT, the more energy you use, the more you will pay for the CCL.
The rate for how much you will pay is calculated based on your business’ per kilowatt-hour of energy usage; the CCL amount is set by the government each year.
Businesses must register for the CCL and those that to do so will face paying a penalty. Your energy provider will then calculate how much the CCL is for your company and apply it to your bill. They will then pay HMRC on your behalf.
You will be able to find details on how much you have paid for the CCL on your business energy bill.
Many businesses can apply for capital allowances when buying energy-efficient appliances. Capital allowances will reduce the tax you pay on qualifying equipment.
Items that are eligible include:
As the CCL is automatically added to your business energy bills, you cannot reduce your rates unless you qualify for one of the above exemptions.
However, you can reduce your CCL costs by increasing energy efficiency within your business. Your business can take steps to reduce your energy usage and your CCL rates by:
The quickest way to save on your business energy costs is by comparing energy prices.
At Business Energy, our team of experts can help you find the cheapest energy deal that meets the needs of your business.