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What you need to know about the CCL

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The impact of global warming has been documented over many years, so the UK government is constantly looking for ways to control the number of greenhouse gases released into the atmosphere. 

One of the methods of achieving this was the Climate Change Levy (CCL), an environmental tax on energy to non-domestic users to encourage businesses and organisations to operate in a more environmentally friendly way. This tax affects schools as well as businesses, so what do you need to know about the CCL?

Back in 2015, HMRC increased the CCL by around 2.5% for gas and electricity. They are due to rise again in 2019 and this could cause a dramatic increase in your energy bill, so it’s a good idea to have a thorough understanding of what CCL is. The increase in CCL is due, in part, to the government ending the CRC Energy Efficiency Scheme in March 2019, but while state-funded schools were exempt from CRC, they might not be for the CCL.

What is the CCL?

The CCL taxes non-domestic properties and organisations on their energy usage. It is charged on taxable commodities (gas, electric, petroleum, coal, lignite, and coke) supplied for lighting, heating, and power purposes to business customers in the industrial, commercial, agricultural, and public service sectors. It’s designed to encourage businesses to use less energy because, since the levy is applied on a per-kilowatt-hour basis, the main way to reduce the tax bill is to decrease energy consumption.

At time of writing, the current CCL rate is 0.203m/kWh for natural gas and 0.583m/kWh for electricity. On 1st April 2019, this will go up to 0.339p/kWh for natural gas and 0.847p/kWh for electricity – a significant increase compared to increases in previous years.

The levy will likely appear on your energy bill as a separate line item, usually above the VAT line (CCL is also VAT chargeable).

How can I lower the CCL?

As we mentioned, decreasing energy consumption is the best way to minimise your CCL expenses. However, there are other ways to reduce your CCL bill. The best way is to get a Climate Change Agreement (CCA), which can reduce your electricity CCL by 90% (93% after April 2019), and your natural gas CCL by 65% (78% after April 2019).

A CCA is a voluntary agreement to reduce energy use and carbon emissions. To apply for a CCA, you first need to be eligible, and in order to be eligible, you need to be running a process that is eligible. You can check if you are eligible by looking at appendix A of the CCA operations manual. Just be aware that CCAs set ambitious targets for bettering energy efficiency, so make sure you already have a strategy considered for accomplishing this.

You can gain exemption from CCL if you choose to get most of your energy from renewable resources, or low CO2 sources such as solar, wind, or Combined Heat and Power (CHP).

If your organisation qualifies for a Reduced Rate VAT, you don’t need to pay CCL. Also, if you are a Foundation or church school and academy you’re exempt from paying said tax. If you are not on a reduced rate VAT but want to know if you should be, talk to Zenergi about whether or not you have any qualifying activities – we’ll be happy to assist.

What steps should you be taking?

There’s still just under a year before the CCL increases drastically. That should leave enough time to work out a strategy of energy conservation to reduce your energy expenses. Start off by identifying problem areas that consume energy and work out how you can reduce energy consumption there. In a school, computer rooms tend to be large drains on energy, so are a good place to start. When you have addressed problem areas, have a think about what small measures will help with reducing energy consumption; a lot of small measures together can make a big difference.

It might also be worth thinking long-term and looking at on-site renewable power or low CO2 energy sources. There are surprisingly affordable options for schools to operate their own green power generators, such as solar panels, biomass boilers, or wind power (both on-site and via energy providers). If these measures don’t qualify you for CCL exception, they will help you to reduce energy consumption and, thus, decrease how much you pay for the CCL.