VAT on DIRECT DEBIT

ann_droid

Hi

I was with Utility Warehouse, until I discovered this...

After decades of paying utility bills monthly, and never having VAT deducted, I am unable to ascertain what the 5% is for on a financial transaction like a Direct Debit.

The actual breakdown of the bill is abysmal...

Electricity usage this month
Date range (reading type) Meter readings
Start                     End  kWh  used                 unit          rate (p)              Total
08 Mar 25  to 31 Mar 25   Day   3665    3714 49           34.153              £16.73
08 Mar 25  to 31 Mar 25 Night  11016 11397 381          5.305               £20.21

Total electricity usage 430 kWh                                                               £36.94

Electricity usage charged                                                                         £36.94
Standing charge 08-03-2025 to 31-03-2025                                            £12.90
Total electricity charges                                                                           £49.84

Your charges this bill
Electricity budget plan                                                                             £55.00
VAT @ 5%                                                                                                £2.75
Your payment this bill                                                                              £57.75

~~~~~~~~~~~~~~

April total charges                                                                                   £49.84
April budget plan payment                                                                     +£55.00
After payment you're in credit                                                                  +£5.16

Is this unique?  Wrong?  or something else?

QrizB

As soon as I saw the subject line of your post I thought "Utility Warehouse".

No, it's not normal. Yes, it is correct.

Mark_d

You have to pay VAT on energy.  The rate for this VAT is 5%.  I've surprised how you avoided VAT on your energy bills for decades

MattMattMattUK

ann_droid said:

Hi

I was with Utility Warehouse, until I discovered this...

After decades of paying utility bills monthly, and never having VAT deducted, I am unable to ascertain what the 5% is for on a financial transaction like a Direct Debit.

The actual breakdown of the bill is abysmal...

Electricity usage this month
Date range (reading type) Meter readings
Start                     End  kWh  used                 unit          rate (p)              Total
08 Mar 25  to 31 Mar 25   Day   3665    3714 49           34.153              £16.73
08 Mar 25  to 31 Mar 25 Night  11016 11397 381          5.305               £20.21

Total electricity usage 430 kWh                                                               £36.94

Electricity usage charged                                                                         £36.94
Standing charge 08-03-2025 to 31-03-2025                                            £12.90
Total electricity charges                                                                           £49.84

Your charges this bill
Electricity budget plan                                                                             £55.00
VAT @ 5%                                                                                                £2.75
Your payment this bill                                                                              £57.75

~~~~~~~~~~~~~~

April total charges                                                                                   £49.84
April budget plan payment                                                                     +£55.00
After payment you're in credit                                                                  +£5.16

Is this unique?  Wrong?  or something else?

UW do handle VAT in a weird way, but it does work out correctly.

WiserMiser

On domestic bills the calculated consumption costs and standing charges are shown without VAT.  5% VAT is then added at the end.

Quotations from suppliers and on comparison sites include VAT.  It's an industry standard.

WiserMiser

You'll have been paying VAT on domestic energy bills right from the start or since March 1993, whichever came later.

la531983

WiserMiser said:

You'll have been paying VAT on domestic energy bills right from the start or since March 1993, whichever came later.

I suspect hes querying why isnt the VAT calculated on 5% of the usage of £49.84 (so £2.49 extra). As someone who isnt familiar with how this company bills what is a "budget plan", and why is the VAT being worked out on £55 and not £49.84?

molerat

Budget plan is just the usual monthly fixed DD.  I am sure it will be some sort of wheeze to delay paying over the VAT but it does work out correctly and OP's account is in fact in credit by £5.16 + VAT so £5.42 if it came to a refund.  £49.84 x 1.05 = £52.33 - £57.75 = £5.42.  It doesn't really matter which one you calculate the VAT on - either usage + VAT or DD - VAT, It all works out correct in the end, .

WiserMiser

UW's methodology has been queried many times before.

https://forums.moneysavingexpert.com/discussion/6571067/utility-warehouse-electric-bill/p1

It's completely OK, it's just an alternative way of number crunching.

Think of it like a physical warehouse.  As you enter the building you have to buy special Ⱦokens, a similar procedure to a bureaux de change.  The rate of exchange is Ⱦ1 =  £1.05.

The warehouse pays the government 5p and once you're inside, everything is sold without any more tax added, the Ⱦ price you see is the price you pay.  However, the warehouse accepts payment only in Ⱦokens.

In essence it's pre-payment VAT rather than the traditional post-payment VAT.

MWT

Mostly these more complex schemes try to prepare for the impact of a VAT rate change by accounting for the VAT element as each monthly payment is received.

If you don't do that then it creates a more complicated calculation at the point where the rate changes.

Customers do find it confusing though, BG used to do a similar thing by deducting VAT from the monthly payments and adding the net amount to the account balance, then applying the ex-VAT costs incurred against that balance before showing the VAT on the invoice.

ann_droid

Mark_d said:

You have to pay VAT on energy.  The rate for this VAT is 5%.  I've surprised how you avoided VAT on your energy bills for decades

Hi

The VAT rate on Electricity is 20%, unless the reduced rate is applied, when it is charged at 5% for certain sectors.

VAT 701/19  The reduced rate of VAT applies to supplies of fuel and power for qualifying use. 

VAT should be charged at the time of supply or raising of the invoice, my DD and their invoice are two separate dates/times and I don't like that deviation.

But as I m no longer a customer I will let it lie for now.

Thanks for all the fish replies.