The supply of fuel, power, heat, refrigeration, or other cooling and ventilation are subject to VAT at 5 per cent when provided for a “qualifying use”. A qualifying use includes use by a charity for non-business activities and use in a “relevant residential building” (for example, a care home, hospice or student accommodation).

In addition, the provision of small quantities of fuel and power at a given site (for example, no more than 1,000 kilowatt hours of electricity per month or no more than 150 therms of piped gas per month) are treated as provided for domestic use and therefore also subject to the 5 per cent rate.

If 60 per cent or more of the fuel or power is supplied to the charity for use in non-business activities then a charity can pay the reduced rate of VAT on the whole supply.

If less than 60 per cent of the fuel or power is for non-business use, VAT will be charged pro rata – that is, at the reduced rate on that portion which is for non-business use and at the standard rate on that portion which is for business use.

In practice, charities will most likely need to provide the supplier with a certificate to support the application of the reduced rate on the basis of Charitable non-business use.

For further information see HMRC VAT Notice 701/19: Fuel and Power.