Can a care home get reduced-rate VAT on energy?

What HMRC says

HMRC's fuel and power notice lists the places that count as residential accommodation for VAT. These include homes providing care for the elderly or disabled, and institutions that are the sole or main residence of at least 90% of their residents. Hospitals, prisons and hotels are not treated as residential accommodation.

The notice does not name nursing homes separately. A nursing home that is the residence of its residents will usually fall under the same description, but the supplier will ask you to confirm the facts, and HMRC can advise on borderline cases.

The rates

Energy use	Rate
Gas for qualifying residential use	5%
Electricity for qualifying residential use, GB, 1 Oct 2026 to 30 Jun 2027	0%
Non-qualifying commercial use (for example a separately run café or a nursery in the same building)	20%

The temporary zero rate applies to the same qualifying uses as the 5% relief, so a care home eligible for the reduced rate benefits too. HMRC first set the end date as 31 March 2027; its fuel and power notice, updated on 28 October 2026, says Budget 2026 extended it to 30 June 2027, after which it goes back to 5%. The notice does not make the relief depend on whether the home is run by a charity or a private company: what counts is the use of the building.

Mixed-use sites and the 60% rule

If 60% or more of the supply at one site is for qualifying use, the whole supply is reduced-rated. Below 60%, only the qualifying share is.

Worked example (gas, net of VAT £20,000 a year): a home with 85% residential use gets the whole £20,000 at 5%: VAT £1,000. If only 50% qualified, VAT would be £10,000 × 5% = £500 plus £10,000 × 20% = £2,000, so £2,500.

How to claim

1. Work out the qualifying percentage for each site.
2. Give your supplier a signed declaration naming the premises, the qualifying percentage and the person signing. Tell them if use changes.
3. Check your next bill shows the right rate, and ask for a correction if not.

See our declaration guide. HMRC says suppliers must make reasonable checks on declarations, and whoever gives an incorrect one may face a financial penalty.

Other cost points

Care homes use a lot of heat and hot water around the clock, so contract choice and standing charges matter. Our care home energy guide covers this. Larger homes may be small or medium businesses rather than microbusinesses; see what counts as a microbusiness.

Evidence suppliers may ask for

Expect the supplier to want confirmation of what the building is used for, such as your registration details with the care regulator, plus the premises address and the qualifying percentage. Keep floor plans or a short description showing which areas are residents' accommodation and which are not. If your supplier cannot apply the right rate straight away, ask for the bill to be reissued and any overpayment credited. Operators of several homes should give a separate declaration for each site.

Next steps

Confirm your status with the supplier, send the declaration, then review your contract with our contract terms checklist. Also see zero-rate VAT on electricity.

Biz Energy is independent and not affiliated with any supplier, broker or comparison site, and takes no commission. This is general information, not legal, tax or financial advice.