What is climate change levy and rates for 2018-19? What are the exemptions?

“The environmental tax that is charged on energy used by businesses to function is called the Climate Changed Levy. One can pay climate change levy in either main rates or carbon price support (CPS) rates. From 1st April 2017 to 31st March 2018 the rate for natural gas is 0.198p/kWh and for electricity is 0.568p/kWh. From 1st April 2018 to 31st March 2019 the rate for natural gas is 0.203p/kWh and for electricity is 0.583p/kWh.”

What is the Climate Change Levy (CCL)?

The environmental tax that is charged on energy used by businesses to function is called the Climate Changed Levy. In a most simple way to describe it, the Climate Change Levy is an energy or environmental tax for non-domestic users in the UK.

The motive of this tax plan is to create more energy efficient atmosphere for businesses operations that can help businesses to reduce overall carbon emissions helping in further reducing greenhouse effects.

Businesses that are associated with industrial, public services, commercial and agricultural sectors come under the Climate Change Levy. These businesses are charged taxes on commodities that are taxable for lighting, heating, and power consuming purposes.

Climate Change Levy Rates

Climate Change Levy Rates

One can pay Climate Change Levy (CCL) in the either of the below rates:

  • main rates
  • carbon price support (CPS) rates

The difference between main rates and CPS rates are highlighted below.

Main rates

Businesses associated with the above mentioned sectors will be have to pay CCL at the main rate on gas, solid fuel (e.g. coke, coal, petroleum coke or lignite) and electricity use. You can find these rates in on your electricity or business gas bills.

Charity organisation engaged in non-profitable or non-commercial activities, and also the organisations that encourage below the minimum limit consumption of energy are relieved from paying main Climate Change Levy rates.

Carbon price support rates

If CCL has lower CPS rates then businesses are encouraged to produce their own electricity with the use of low carbon technologies. Organisations that produce their own electricity for their own functioning purposes are qualified for reduced Carbon price support rates on Climate Change Levy.

Climate Change Levy applies to

If you are into one of the below mentioned business sectors then you may have to pay main rates of Climate Change Levy

  • industrial
  • commercial
  • agricultural
  • public services

You will not have to pay the main rate of Climate Change Levy on particular supplies, if you happen to be a:

  • organisation that consumes very small amounts of energy or power
  • domestic energy consumer
  • non-commercial entity engaged in charity activities

Exemptions from CCL

Exemptions from CCL

Fuels that are normally exempted from the main rates of CCL are gas, electricity and solid fuel provided any of the below mentioned apply:

  • The fuels will not be used in the UK
  • These fuels are provided to or from particular schemes that are combined heat and power (CHP) and also registered with the CHP quality assurance (CHPQA) programme
  • Before August 1, 2015, the electricity generated from renewable sources
  • The electricity produced by them are produced from generating station with 2MW or greater capacity
  • They will not be used as fuel
  • They will be used in particular types of transport

Take an advice from a professional if you are willing to know more about exemptions and reliefs.

Pay a reduced rate

You can get a reduction on the main rates of CCL if you’re an energy intensive business and have entered into a climate change agreement (CCA) with the Environment Agency.

Energy intensive businesses can get a 90% reduction for electricity and a 65% reduction for gas, liquefied petroleum gas (LPG), coal and other solid fuel.

Check if your business is eligible. Your industry trade association can also give advice.

Carbon price support rates

The CPS rates of CCL encourage industry to use low carbon technology for producing electricity.

You pay CPS rates for:

  • gas
  • LPG
  • coal and other solid fossil fuels

Who pays Carbon Price Support rates?

The owners of stations that generate electricity and the ones who operate the combined heat and power (CHP) stations are supposed to pay the Carbon Price Support rates of Climate Change Levy.

Small energy generators, stand-by energy generators and the stations that generate energy in Northern Ireland are some of the suppliers that do not have to pay Carbon Price Support rates.

Climate Change Levy (CCL) charges

The appropriate CCL is charged by business energy supplier, as they are responsible for supplying the taxable commodities. As soon at the CCL charge is collected by energy supplier, it is sent to HM Revenue & Customs in the UK for further processes.

The cost of CCL to your business

Below table will help you understand the latest Climate Change Levy rates per kilowatt hour on natural gas and electricity.

Time period Natural gas Electricity
1 April 2016 to 31 March 2017 0.195p/kWh 0.559p/kWh
1st April 2017 to 31st March 2018 0.198p/kWh 0.568p/kWh
1st April 2018 to 31st March 2019 0.203p/kWh 0.583p/kWh
1st April 2019 to 31st March 2020 0.339p/kWh 0.847p/kWh

Paying a reduced rate on CCL

Energy intensive organisations have to enter into a Climate Change Agreement (CCA) with the Environment Agency to reduce the main rates on CCL charges. Climate Change Agreement is a voluntary agreement that organisations can enter into to reduce consumption of energy and carbon emission.

Check if you are eligible to enter this agreement with Environment Agency. If you agree to be bound by CCA, you will get reduced rates as far as 90% in the CCL rate that has to be paid on the electricity bills and on other fuels you will receive 65%.

What are the CCL rates?

CCL rates were frozen at the time of introduction of the levy. Since then, the rates have increased significantly.

Financial impact of the Climate Change Levy will further increase after the below two recent developments:

  • To balance the shortfall in the revenue that caused the shutdown of the CRC scheme will lead to increase in CCL significantly from April 2019, as declared in the 2016 Budget by the Government.
  • In the Government’s Autumn Statement in 2015, there was an announcement made to end the CCL relief for electricity generated from renewable resources under the renewable source contract.

Reduce your Climate Change Levy costs

You can take guidance from professionals in the field to help you out in reducing the cost impact of the CCL.

Climate Change Agreements

You can enter into Climate Change Agreement (CCA) if you business is qualified for the same to reduce your cost impact on CCL. This will help you get significant discount on the CCL functional to gas and electricity. In April 2019 when the CCL rates will go up there is chance of discounts going up.

If you are not very sure and getting confused about the entire scheme then it is always advisable that you hire a professional who can help you understand the schemes associated with Climate Change Levy, Climate Change Agreement and in the process can also help you get discounted CCL rates.

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