The Climate Change Levy, or CCL, was set up in 2001 as part of a package of measures to encourage businesses to improve their energy efficiency.
The levy will add around 15% on to your business’ energy bill, and from 2007 was set to rise in line with inflation. It means that the more energy efficient you are, the less you are likely to pay.
HMRC’s explanation of the levy is unjustifiably complicated, but the basis of the rules are that they apply only to VAT-registered businesses – so if you’re a freelancer or a small eBay business, chances are you won’t need to pay the levy.
Your energy company will assess how much you need to pay based on how much energy you use, and where it comes from. So if, for example, you are a customer of Good Energy or Ecotricity, both of whom source a significant proportion of their energy from renewables, you will pay less than if you are registered with Powergen or EDF. The tax will then be added on to your energy bill by the energy company.
If your business is part of the 40 or so ‘energy-intensive industries’ covered by Climate Change Agreements, you may qualify for a reduction on your levy.
The agreements give businesses the chance to get an 80% reduction, provided they can meet milestones set to them by the government. For more information, see the Defra website.
