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With Businesses seeing Energy Costs spiral out of contract, and with no financial help from the Government, will a proposed Temporary Reduction in VAT bring any relief?

Jun 6 2022 10:14 AM

As Businesses continue to struggle with rising costs caused by increasing inflation, Leaders from across the United Kingdom are pushing for a Temporary Reduction in VAT on Business Energy Bills, however will it make any difference?

Why is Inflation increasing sharply?

The Office for National Statistics (ONS) confirmed on the 18th May 2022, the Consumer Price Index (CPI) rose by 9% in the 12 months to April 2022, marking the highest level its reached for 40 Years.

This increase, up from 7% in March 2022, is driven by the rise in the Ofgem Energy Price Cap resulting in a Circa £700 increase in Domestic Utility Bills, for the average Household.

The ONS’s Chief Economist Grant Fitzner was quoted as advising “Around three quarters of the increases in the annual rate of (Inflation) this month, came from Utility Bills”.

Would a Temporary Reduction in VAT, make a big difference? 

On the 26th May 2022, the Chancellor Rishi Sunak announced a “Temporary Targeted Energy Profits Levy” of which is expected to raise £5bn, and will be used as part of a package of measures to help with the expected increase of Domestic Household Energy Bills this Winter. 

Businesses, however, are set to miss out on any benefits, even as overall costs continue to increase in line with rising inflation and Energy Prices.  Due to this, there are calls from Business Leaders across the United Kingdom for the Chancellor to issue a Temporary Reduction in VAT on Business Energy Bills from 20% to 5%.

A Temporary Reduction in VAT would see an obvious benefit, with the additional 15% being retained by Businesses.  However, as Wholesale Prices continue to rise, as well as Government Renewable and Green Levies (Climate Change Levy) seeing annual changes, the overall benefits will be marginal.

There are several opportunities for Commercial Businesses to look at reducing ongoing costs to help combat Rising Inflation and Energy Prices.  Cost Advice – Energy Specialists are here to help you and your business.

Is there anything Commercial Business can do to reduce ongoing costs?

CostAdvice - Energy Specialists are here to help, and we are on hand to offer a Full Energy Health Check on all of your current supplies & agreements.

Why a health check?

Did you know that not all business energy contracts are the same?

Also, not all businesses should be charged the same costs.

Our health-check looks deeper than just looking at your rates.

We recently identified £10,000 of annual savings for a Museum Group that were already being looked after by another broker.

If you would like any further information regarding the above, or if you have any questions relating to your Commercial Energy Agreement, please contact Daniel Walker on 01246 252788 or by e-mail at daniel.walker@costadvice.co.uk, and he will be happy to help.