Impact of VAT cut on fixed deals?

Yawn

I followed MSE's advice and took out a fix early August, which seems to have paid off so far, but I'm curious to see what will happen if the suggested cuts in VAT and green levies go ahead. Does anyone know if energy companies are required to pass these on? I know a fix is a fix, but it would still seem unfair if a company keeps the difference. (No exit fee so I can still abandon the fix if need be.)

Phlik

A fixed tariff still comprises of 5% vat plus green levies so I can't see them being treated differently to variable tariffs.

[Deleted User]

VAT is a pass through tax which is why your bill shows charges then the 5% VAT. If VAT was dropped to zero then it is a simple exercise to drop it from the bill without impacting the tariff. I have absolutely no idea how the Government and suppliers would deal with green taxes.

stewie_griffin

I suspect those on fixed deals (like myself) would only benefit from the cut to VAT unless the removal of green levies was done as a rebate rather than lowering the unit price.

pochase

In a quote the unit rates have to be shown including VAT, but on the bill they are excluding VAT, VAT is only added as the last step.

So I don't see why it would not be removed on fixed tariffs.

FreeBear

Unlikely any cut to the green levies (more correctly, “social and environmental obligation”) would be passed on if you are on a fixed deal. But before campaigning for a cut in this levy, you need to look at what the money is actually spent on. Contrary to the claims of some, it doesn't go to line the pockets of the solar/wind farm companies. The bulk of it funds things like the Warm Home Discount, insulation & replacement boilers under the ECO scheme, and rebates for certain vulnerable households. Cut the green levies, and funding for these schemes will either be cut or found from other sources.

I would rather pay the green levies than see the vulnerable in society freeze to death over winter or pay more in direct taxation (income tax, NI contributions, VAT).

ariarnia

i think is has been suggested truss is thinking about cutting vat on all things not just energy? that would have a bigger impact (and cost the government more) than green levys. this weighting is horrible! i know its because the two candidates have completely different opinions about what should be done so they can't announce until they know who won but we dont need more anxiety right now. 

spot1034

If the green levy is suspended, this would be with the clear intention that customers would benefit. The levy is simply charged and then passed on by the supplier, and I don't think it would be seen as acceptable that the supplier would get to keep it. Therefore I think they would find a way to rebate it, and it may be that a rebate would be the easiest way for it to be processed for all accounts anyway.

[Deleted User]

ariarnia said:

i think is has been suggested truss is thinking about cutting vat on all things not just energy? that would have a bigger impact (and cost the government more) than green levys. this weighting is horrible! i know its because the two candidates have completely different opinions about what should be done so they can't announce until they know who won but we dont need more anxiety right now. 

I agree that the present political situation isn’t helping anyone.

That said, I am not sure how taking 5% of VAT is a solution to our present situation when people are struggling to pay their energy bills or eat. Food is zero-rated for VAT. I also doubt that cafes; coffee shops et al will pass the VAT savings on.

ariarnia

Dolor said:

ariarnia said:

i think is has been suggested truss is thinking about cutting vat on all things not just energy? that would have a bigger impact (and cost the government more) than green levys. this weighting is horrible! i know its because the two candidates have completely different opinions about what should be done so they can't announce until they know who won but we dont need more anxiety right now. 

I agree that the present political situation isn’t helping anyone.

That said, I am not sure how taking 5% of VAT is a solution to our present situation when people are struggling to pay their energy bills or eat. Food is zero-rated for VAT. I also doubt that cafes; coffee shops et al will pass the VAT savings on.

some food, not all. but i was thinking buying things to help with saving energy. on my 'think about buying list' are new boots and jackets for OH and me so we can take the kids out to the park or something on cold but dryish days over the winter, a couple of torches or lanterns for if theres power cuts (that ive been thinking about buying for a while but havent gotten around to), bord games to encourage the kids away from the power hungry xbox and for family games nights, hot water bottles, hoodies and electric throws for on the sofa. all things that i am thinking about buying already but that would be a little cheaper without the VAT or with less VAT and would help us keep the bills lower so hopefully recoup at least a little of the cost over winter.   

one other thing i was wondering about is the VAT we pay on logs. its not broken down separately on our invoice i don't think. but its a local supplier and i don't know if he's vat registered or not. and probably too late for this year unless we get through a lot more than expected as we've already filled our stores plus have four extra sacks out back covered with tarps. 

and when they cut VAT back in 2020 then the pubs and cafes around here did cut their prices to attract business (and we do like to support local business and get out of the house for a drink and slice of cake at least sometimes if we can). it does us good to see other humans in a social environment sometimes

and PET FOOD. OH just reminded/told me that pet food is not 0 rated for vat and i know if people are struggling to heat or eat then theres also a lot of people who will be worrying about heating or eating or feeding their pet. and i know which i would pick if that was me in that situation. so now to my to buy list i'm adding extra pet food to drop into the food bank baskets. poor animals should not suffer due to our silly human ways. 

anniecave

The green levies will be referring to business (or rather non-residential) type bills. Business tariffs have various such levies either charged separately or built into the cost of the tariff. A major issue as well as individuals potentially needing help to pay their bills are the fact that businesses are also similarly affected and for some businesses increased energy costs could simply mean a business isn't viable any more.  As the above posters said, a change to VAT would be simple to implement and it would be universal, no matter what type of tariff you are on.