How to save on energy tax
How to save on energy tax
A NEW energy tax, the Climate Change Levy will come into effect from Apr 1, 2001, following the governments objective to reduce energy consumption by 10% before 2010.
It will mean that all parts of the non-domestic sector will have to pay the levy (table 1), writes James Baker, of the Laurence Gould Partnerships Sussex-based office.
But there are various ways of reducing the tax paid, and in some cases complete exemption. Use of fuel oil will be exempt as it is already subjected to hydrocarbon oil duty, and use of natural gas in Northern Ireland is exempt for up to five years, while the horticultural sector can gain a 50% discount for five years.
If energy consumption meets the requirements as shown in table 2, all producers will avoid the levy altogether, but if energy consumption exceeds these limits, an 80% reduction in levy rate can be claimed by British pig, poultry meat and egg producers.
Pig and poultry farmers are accepted to be energy intensive sectors and are therefore eligible to enter an energy reduction agreement administered through the NFU.
While all applications received by the NFU with the postmark dated no later than Jan 22, 2001 will be processed for this years scheme, producers who have missed this deadline are permitted to join the scheme next year for the remaining nine years energy target reductions.
Once entered into the agreement, each sector will be required to meet reductions in energy use:
lPig production – 16% cut over 10 years.
lPoultry meat – 13% cut over 10 years.
lEgg production – 11.5% cut over 10 years.
If the biannual targets are not met by the producer, the discounted levy will not apply for the following two year period starting in April.
But the producer is able to remain in the agreement and attempt to regain the reduced rate of levy during the subsequent period by catching up on the target.
The agreements made are not contractually binding and so the producer can drop out at any time, and return to the full tax rates of the CCL.
Although the costs of joining the agreements are kept to a minimum – £104 + VAT for non-NFU members and £56 + VAT for NFU members – care should be taken to see whether the discount on your energy bill would be sufficient to outweigh the administrative costs of joining such an agreement.
The onset of the energy tax may force producers in every sector to take a retrospective view of energy consumption in order to improve energy efficiency, and ultimately reduce their electricity bills. *
Table 1: Fuel type and
levy rate
Fuel type Rate of Levy
Electricity 0.43p/kWh
Gas 0.15p/kWh
Coal 0.15p/kWh
LPG 0.07p/kWh
Fuel Oil Exempt
Pig and poultry producers can claim a climate change levy reduction, says consultant James Baker.
Table 2: Levy requirements
Fuel type Maximum permitted use of Cost of exceeding daily limit
fuel to avoid paying any tax a year by 1kWh a day
Electricity 33kWh a day £53.36
Gas 145kWh a day £79.94