Overview

This bill proposes to exempt domestic supplies of electricity, oil, and gas from Value Added Tax (VAT) in the United Kingdom. This means that households would no longer pay VAT on their energy bills.

Description

The bill amends the Value Added Tax Act 1994 to create a new exemption for domestic energy. This exemption covers:

• Coal gas, water gas, producer gases, or similar gases;
• Petroleum gases, or other gaseous hydrocarbons (excluding road fuels already subject to excise duty);
• Fuel oil, gas oil, or kerosene (excluding hydrocarbon oil subject to excise duty, with exceptions for rebated kerosene used for private pleasure flying);
• Electricity.

The exemption applies to supplies for domestic use or use by charities outside of business activities. Specific thresholds are defined for determining what constitutes "domestic use" based on consumption levels. For instance, the exemption for gas applies if consumption doesn't exceed 150 therms or 4397 kilowatt hours a month. For fuel oil, gas oil or kerosene the limit is 2300 litres. The bill also provides detailed definitions for terms like "fuel oil," "gas oil," and "kerosene" to ensure clarity. If a supply is partly for domestic use and partly not, apportionment is made to determine the VAT liability.

Government Spending

The bill will likely result in a significant reduction in government VAT revenue. The exact figure will depend on energy consumption levels and current VAT rates. No specific figures are provided in the bill itself.

Groups Affected

The main groups affected are:

• Households: Would benefit from lower energy bills due to the removal of VAT.
• Charities: Would benefit from VAT exemption on energy used for non-business purposes.
• Energy Suppliers: Would need to adjust their billing systems to reflect the VAT exemption.
• UK Government: Would experience a reduction in VAT revenue.

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