Nicola, I'll try to answer your question as simply as possible!
Supplies of electricity and gas are subject to the standard rate of VAT, which is at present 17.5% - but between 1 December 2008 and 31st December 2009 was 15%. www.guardian.co.uk/uk/2009/dec/09/vat-rise-pre-budget-report-chancellor.
Under the rules, supplies of ‘qualifying use’ electricity and gas are subject to the reduced rate of VAT. ‘Qualifying use’ is basically the domestic use of energy and energy used by charities for non business purposes. This means that residential customers are subject to the reduced rate - but also business and charities in certain qualifying situations.
If you are a business or charity, you'll be charged the standard rate of VAT on your electricity and gas unless:
* You use small quantities of energy
* You believe some, or all of, the energy you are using is for ‘qualifying use’ - in this instance, notify your supplier (usually through VAT certificates). If the proportion of energy use which is termed as ‘qualifying use’ is equal to or more than 60%, your supplier will apply the reduced VAT rate to 100% of the energy usage on your bill. More information on the VAT rate of supplies of electricity and gas can be found on http://customs.hmrc.gov.uk/
