VAT on Electricity

steelman99

Been of a certain age ( old) i remeber when VAT was first added to electic bills - at that time we were adivsed that by putting our accounts in credit by as mouch as we could afford was a good thing as we had prepurchaced the energy at the 0% VAT rate , I personaly had about £300 worth of credit and managed to avoid been charged VAT for over a year at the time.

Now that the government has removed VAT from Electricity ( for a short time) whats changed? as any credit on the account could bee said to of prepurchaced fuel that has not been used yet at the 5% VAT Rate , also I guss if VAT is reintroduced on electricity any purchaced over the winter would be prepurchaced at 0% VAT

QrizB

That's not how it works for a credit account (it might be different for prepayment).

Your account balance is just that, a cash balance. Your energy company bills you periodically and takes payment from the account balance.

You're not pre-buying energy.

Woodstok2000

Maybe if you were prepurchasing units of electricity (never had a prepayment meter, did they ever work like that?). But with credit accounts (and I think with modern prepayment meters) you are building up a balance which the electricity company will take payment from based on the price at the time.

I could send money to EON at any point, but the unit price of the electricity I use today will always be the same.

WiserMiser

https://forums.moneysavingexpert.com/discussion/comment/82154936#Comment_82154936

I've never had a pre-payment meter. In their wisdom, TPTB decided that VAT on gas and electricity bills would no longer be zero rated from All Fools' Day 1994.

I paid a lump sum upfront before the deadline and avoided paying VAT for a year or two. The British Gas and Seeboard monopoly suppliers just nibbled up the credit; after it had expired they billed in the normal way (at the lower VAT rate, which was then 8%)

Have the rules have since changed?

dunstonh

If you are with Utility Warehouse, it may work. They still charge VAT on the basis of the monthly direct debit amount rather than the actual usage. They are a bit of an anomaly, though.

luci

https://forums.moneysavingexpert.com/discussion/comment/82155729#Comment_82155729

I can attest to this. I also have never had a pre-payment meter. I overpaid to avoid the additon of VAT for a good while. I may be wrong, as it was so long ago, but my recollection was that the VAT was 5% to start with.