Climate Change Levy exemptions and reliefs

Status: LawThe Climate Change Levy is a tax on business energy use, charged per unit consumed. The main rate is 0.801p per kWh for both electricity and gas from 1 April 2026, rising to 0.827p per kWh from 1 April 2027.

It appears on the bill as a separate line among the non-commodity charges, and VAT is charged on top of it. Most business supplies pay the main rate, but a significant minority should not, and the difference is not applied automatically in every case.

Three groups are excluded from the main rates altogether:

• Supplies for domestic use.
• Supplies for the non-business use of a charity, for example a village hall or a place of worship.
• Small quantities: below 1,000 kWh of electricity or 4,397 kWh of gas per month per site, the supply is treated as domestic and the levy does not apply. VAT is charged at the reduced rate on the same basis.

Where a building mixes business and qualifying use, the supply can be apportioned so only the business share carries the levy. Small sites on a large portfolio are routinely billed as though none of this applies, because the supplier bills every site on the account the same way unless told otherwise.

A Climate Change Agreement, available to eligible energy-intensive sectors, reduces the levy to 8 per cent of the main rate on electricity and 11 per cent on gas. The agreement is held with the Environment Agency, and the relief only reaches the bill once the supplier holds the right certificate.

Relief is claimed with two HMRC forms, and the supplier must hold the certificate before it can apply the relief:

• Form PP11, the supplier certificate, tells your supplier the level of relief to apply. A separate form is needed for each fuel.
• Form PP10 is the supporting analysis sent to HMRC, and is used to work out the percentage of relief declared on the PP11.

The forms are updated each tax year, and a certificate that was never sent, or was sent once and never renewed, is the usual reason a qualifying site pays the full rate. The correction is a form, not a negotiation.

We check each site against the exclusions and any Climate Change Agreement, confirm what the supplier holds, and put the certificates in place where a relief applies. Where a site has been billed at the main rate while qualifying, the recovery follows the route set out in our sheet on recovering an overcharge, through our cost recovery work.