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HMRC internal manual

VAT Fuel and Power

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HM Revenue & Customs
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Scope of the reduced rate: domestic Use: supplies deemed to be for domestic use

The general intention of the reduced rate is that it should apply

  • to supplies of fuel and power for use in domestic households, including residential homes (VFUP2330), and
  • to charities using fuel for non-business activities (VFUP2400).

However, it is sometimes difficult for suppliers to determine how the fuel is to be used.

As a simplification measure, we therefore always treat certain supplies as though they are for domestic use. These are generally known as de minimis supplies (although to some extent this is a misnomer). The VAT Act 1994 Schedule 7A, Group 1, Note 5 reads as follows.

## Law ## Comment
   
5 For the purposes of this Group the following supplies are deemed as domestic use-  
(a) a supply of not more than one tonne of coal or coke held out for sale as domestic fuel; The de minimis limit is restricted to one delivery per day per set of premises. If, say, a supplier makes two deliveries of 600 kg on the same day to the same customer at the same premises, this is a single supply of 1.2 tonnes.
(b) a supply of wood, peat or charcoal not intended for sale by the recipient; In this case, de minimis is a misnomer. The reduced rate applies to a supply of any quantity of wood, peat or charcoal held out for sale as fuel, provided that it is not a wholesale supply. A de minimis limit does not therefore apply.
(c) a supply to a person at any premises of piped gas (that is, gas within item 1(b), or petroleum gas in a gaseous state, provided through pipes) where the gas (together with any other piped gas provided to him at the premises by the same supplier) was not provided at a rate exceeding 150 therms a month or, if the supplier charges for the gas by reference to the number of kilowatt hours supplied, 4,397 kilowatt hours a month; As gas is often billed in periods not equalling one month, the de minimis limit may be calculated on a daily basis. In practice, a daily rate of 12/365 x monthly rate may be used, rounded to nearest whole number. The reduced rate may be applied:
  • if the number of therms shown on the bill - divided by the number of days covered - is 5 or less; or
  • if the number of kilowatt hours shown on the bill - divided by number the of days covered - is 145 or less.
The daily rate should be calculated over the entire period of the bill (see VFUP3100).    
  (d) a supply of petroleum gas in a liquid state where the gas is supplied in cylinders the net weight of each of which is less than 50 kilogrammes and either the number of cylinders supplied is 20 or fewer or the gas is not intended for sale by the recipient; In this case, the term de minimis is to some extent a misnomer. While the net weight of each cylinder must always be less than 50 kilogrammes, supplies of more than 20 cylinders are only deemed to be for domestic use if the supply is made to the final consumer i.e. not a retailer.
In practice, all sales of liquid petroleum gas (LPG) for consumption by the customer will be reduced-rated as no cylinders exceeding 50kg are commercially available.    
  (e) a supply of petroleum gas in a liquid state, otherwise than in cylinders, to a person at any premises at which he is not able to store more than two tonnes of such gas; The two tonne limit refers to the safe capacity of the container. The safe capacity of the tank is 85% of the full capacity. This allows for thermal expansion of the liquefied gas and capacity to contain the pressure of the vapour above the liquid. Failure to allow for this would result in the tank pressure relief valves blowing.
  (f) a supply of not more than 2,300 litres of fuel oil, gas oil or kerosene; The de minimis limit is restricted to one delivery per day per set of premises. If, say, a supplier makes two deliveries of 1,500 litres on the same day to the same customer at the same premises, this is a single supply of 3,000 litres. The de minimis limit does not therefore apply.

Further examples of what constitutes a supply for the purpose of the de minimis limit are given in VAT Notice 701/19: Fuel and power.

Kerosene is sometimes used as a substitute for turpentine. Even where kerosene is held out for sale as a turpentine substitute, it complies with the qualifying use conditions for domestic fuel if it meets the specifications for reduced rated oils and is supplied in quantities not exceeding 2,300 litres.    
  (g) a supply of electricity to a person at any premises where the electricity (together with any other electricity provided to him at the premises by the same supplier) was not provided at a rate exceeding 1,000 kilowatt hours a month. As electricity is often billed in periods not equalling one month, we have agreed with the industry that the de minimis limit may be calculated on a daily basis. In practice, a daily rate of 12/365 x monthly rate may be used, rounded to nearest whole number. If the number of kilowatt hours shown on the bill - divided by the number of days covered - is 33 or less, the reduced rate may be applied. The daily rate should be calculated over the entire period of the bill (see VFUP3100).