Church and community building energy

Churches, chapels, mosques, temples and community halls pay for energy on a non-domestic contract, but the tax treatment can be gentler than for an ordinary business. The key idea is the difference between use that is charity non-business use and use that is a business activity, such as regular paid hire of the hall. Whether you qualify for lower VAT, and whether Climate Change Levy applies, depends on how the building is actually used.

Your contract is still a business contract

Even though you are not a commercial firm, your gas and electricity are supplied under a business contract. There is no Ofgem price cap on it and no cooling-off period once you agree a deal. If you are a small place of worship with low usage, you will probably be a microbusiness for energy purposes, since electricity under 100,000 kWh a year or gas under 293,000 kWh is enough on its own. See what counts as a microbusiness. That gives you rights on renewals, notice and back-billing and access to the Energy Ombudsman if a complaint cannot be settled.

VAT: the reduced rate and the temporary zero rate

HMRC's fuel and power notice allows the reduced rate of 5% where fuel and power is for charity non-business use. In general, if a charity makes no charge for an activity, that activity is non-business. Separately, the notice lists religious communities as qualifying residential accommodation, which covers, for example, a convent or monastery.

From 1 October 2026 to 30 June 2027, qualifying electricity in Great Britain is temporarily zero-rated, using the same eligibility as the 5% relief. HMRC first announced an end date of 31 March 2027; HMRC VAT Notice 701/19: fuel and power now gives 30 June 2027 after Budget 2026. It then returns to 5%. Gas is not affected. Business use stays at 20%.

The notice does not specifically discuss places of worship or village halls, and points readers to HMRC's guidance for charities. So treat the following as a general reading of the rules, and confirm your own position with HMRC or your supplier.

The two thresholds

• Small amounts (de minimis). Electricity up to 33 kWh a day (about 1,000 kWh a month) and piped gas up to 145 kWh a day (about 4,397 kWh a month) per premises qualify for the reduced rate regardless of who you are.
• The 60% rule. If 60% or more of the supply is for qualifying use, the whole supply is reduced-rated. Below 60%, only the qualifying part is.

Our short answers on whether a church qualifies for reduced VAT, the 33 kWh limit and what VAT charities pay go through the basics.

Worked examples

A small church under the de minimis limit

A village church uses 8,000 kWh of electricity a year: 8,000 ÷ 365 = about 21.9 kWh a day, below 33. Suppose the net bill is £2,400. At 5%, VAT is £2,400 × 0.05 = £120. During the temporary zero-rate window, the same electricity would carry no VAT. Gas use of 20,000 kWh a year is 20,000 ÷ 365 = about 54.8 kWh a day, below 145, so it also qualifies for 5%.

A hall that is partly hired out

Take a larger parish hall, well over the daily limit, with net electricity charges of £3,000 a year and paying hire groups using a share of the building.

Qualifying share	VAT calculation	VAT
65%	Whole supply reduced: £3,000 × 5%	£150.00
55%	(£1,650 × 5%) + (£1,350 × 20%) = £82.50 + £270.00	£352.50

The step between 55% and 65% is £202.50 on a £3,000 bill. During the temporary 0% period, the qualifying part would carry no VAT, so the 55% case would be £1,350 × 20% = £270 for the electricity portion. Because one measure can trigger a different rate, record how you worked out the percentage (opening hours, floor area, sub-meter) and give your supplier a certificate if requested. Your supplier may ask for a separate certificate for each building.

Regular paid lettings, a café or a nursery run in the building may count as business use. HMRC's notice does not deal with hall hire specifically, so check with HMRC or an adviser, and do not assume charity status makes everything qualify.

Climate Change Levy

CCL is 0.801p/kWh from 1 April 2026 and 0.827p/kWh from 1 April 2027. GOV.UK's CCL exemptions guidance treats supplies below 1,000 kWh a month of electricity and 4,397 kWh a month of gas as domestic, and excludes charity non-business use, so a typical congregation building should see little or none on its bill. For mixed premises a 60% rule applies, as with VAT: if at least 60% of the supply is for qualifying use, the whole supply is excluded, so a hall with a 40% business share would normally pay no CCL. Below 60%, the business share carries the levy. Your supplier applies this from your declaration. See who is exempt from CCL.

Buying energy for a building used a few hours a week

• Standing charges bite. A building used mainly on Sundays still pays a daily standing charge all year. Compare the daily charge as well as the unit rate. See business energy standing charges.
• Heating is the big item. Large old buildings lose heat; a controlled schedule and zoned heating often beat a small difference in tariff.
• Shared meters. If your hall shares a supply with a vicarage or a tenant, you may need a sub-meter to apportion VAT fairly.
• Solar. Some churches and halls have roofs suitable for solar. See commercial solar panels and the Smart Export Guarantee.

Common mistakes

• Never giving the supplier a VAT declaration, so the 20% rate is charged by default. Ask for corrected bills if you were overcharged.
• Letting the contract roll onto an expensive out-of-contract rate after a treasurer or volunteer changes. Put the end date in the church diary.
• Signing a long deal through an intermediary without seeing the commission. Broker fees must be shown in the contract's Principal Terms. See energy brokers and commission.

Keeping records that satisfy your supplier

Suppliers must make reasonable checks on declarations, so keep the evidence behind your percentage: a floor plan with areas marked, a booking diary showing paid and unpaid use, and any sub-meter readings. Review the split each year, because a hall that gains a weekday playgroup or loses a regular hirer will change the figures. If your circumstances change, tell the supplier so the rate on the bill follows.

Next steps

1. Find your meter's daily average use from your annual kWh.
2. Decide the qualifying percentage and record how you reached it.
3. Send your supplier a declaration, then check the next bill.
4. Use the VAT and CCL calculator to test different scenarios.