Can Charities and Not-For-Profit Organisations Get Discounts on Business Energy?
Business energy is electricity and gas that businesses use for daily usage and maintenance of heating, cooling, lighting, electronic devices and many more. The rates depend on the size of the business and the energy provider prices. Are Charities and Not-For-Profit Organisations eligible for discounts on business energy? We look into it below.
However, on average small businesses can annually spend from £900 to £7,300 on electricity and £400 to £2240 on gas. Whilst these prices may seem fair for a typical business, charities and non-profit organisations can often struggle to come up with the cash for these bills and should typically spend as little money as possible on running the business to maximise the amount that is then donated. If you would like to read more information or learn more about the pricing of business energy, you can do so here .
What is a Charity and Not-For-Profit Organisation?
A charity is not the same as a not-for-profit organisation (NPO).
To establish the difference, an NPO i s an organisation that takes its profit and gives whichever proportions of it they decide appropriate to the local community, charities, recreational purposes and many others instead of the business directors and shareholders, based on their goals.
On the other hand, a charity is a type of NPO that donates its profits to people in local or distant communities that require help for cases of poverty, emergency responses in natural disasters, and generally improving their quality of life. Charities have more strict rules by which they abide, like setting spending limits and clarifying who benefit from the donations. They must make decisions that will most benefit their goals and not more or less than the purpose of the operation.
What Discounts Do Charities and NPO’s Get?
The total energy cost is its usage, the price for each kWh and the additional VAT. Usage is specific for every business so cannot be commented on., however, the additional VAT is 20% for business energy. The VAT (value-added tax) is issued by governmental services or products bought or sold and is added to your energy bill on top of the usage price. This VAT is mandatory for businesses that have gross revenue of over £85,000.
However, NTO’s and charities are eligible for a VAT reduction of 15%. They are exempt from the Climate Change Levy (CCL) environmental tax that was put in place to promote greener energy for businesses and reduce carbon emissions, with businesses that met the minimal energy usage requirements not having to pay it. Overall, the total VAT paid becomes 5% instead of 20%.
Who is Eligible for the VAT Discount?
The VAT discount is only available for:
1. UK registered charities
This business has registered in the UK to operate for only charitable purposes, with clear intentions of how they will generate income, what the purposes of this income are, who will benefit and how they will benefit. Their goals must be made clear to the public and the government.
2. NPO’s
As mentioned above, these are organisations that work to improve the community and for social causes. Examples of these are Churches, charities, hospitals, nursing or care homes, universities, etc.
3. Small charities with a revenue of less than £5000
Smaller charities are not the same as UK registered charities as they do not have to register with the government due to their low income. Nevertheless, they are eligible for reduced VAT.
4. Businesses that have a gas usage of less than 4,397kWh per month or electricity usage of less than 1,000kWh per month
These businesses have low energy usage and further the government’s agenda to decrease carbon emissions and often being smaller.
5. Businesses using over 60% of their energy usage for non-profit purposes
This means that more than 60% of the energy usage goes towards needs that do not contribute to the business’s income.
What Can These Businesses do to Reduce Energy Usage?
Unfortunately, charities and NPO’s do not qualify for other discounts except VAT deductions. Whilst this is still beneficial, these organisations should try their best to pay the minimal amount for their energy bills so that the remainder of their revenue can go towards the specific people and groups it was intended for.
A simple yet efficient way to minimise electricity and gas usage is by hiring an energy company to conduct an energy audit. This is where they track your energy usage and give you the data, offering tips and advice on where you could cut down or how. Alternatively, many small businesses have installed a smart meter, where available, to show live energy usage and display patterns in the form of charts. Doing this could identify where you waste the most energy or recognise the peak demand times and lower your usage specifically when these happen, which is usually when energy is more expensive as it is more in demand.
More environmentally-friendly options include switching to green energy, which utilises natural resources that can be replenished to provide energy, instead of fossil fuels that are non-renewable and depleting, which emit greenhouse gases like carbon dioxide when they burn. Moreover, natural resources are cheaper alternatives to fossil fuels so that whilst you are more sustainable. You are also saving money. These sources include solar polar like solar panels, which turns the suns energy into electrical energy, wind power that uses turbines to generate electricity from the mechanical turning of the turbine, and biogases that convert animal and plant wastes into useable energy.
I hope we have answered your question regarding discounts on business energy for Charities and NPOs
To conclude, charities and NPO’s can receive some discount in the form of tax deductions in a bid to lower their energy costs. Still, there are no other ways to deduct from the total energy bills other than simply decreasing usage. Electricity and gases can be cut down by using smart resources that show you wasteful or by changing energy sources. Alternatively, you can compare providers packages and costs to find which are most suitable to your business, although this will be time-consuming and not consistently successful.
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