What is the Levy?
The Climate Change Levy (CCL) is a tax on the use of energy in industry, commerce and the public sector. There are offsetting cuts in employers' National Insurance Contributions and additional support for energy efficiency schemes and renewable sources of energy.
When was it introduced?
1 April 2001.
Why was it introduced?
The aim of the CCL is to encourage businesses to become more energy efficient and reduce their greenhouse gas emissions. It forms a key part of the overall climate change programme. The basic design of the levy follows the recommendations made in Lord Marshall's report ‘Economic Instruments and the Business Use of Energy’, published in October 1998.
What are the benefits?
The CCL is playing a key role in helping the UK meet its targets for reducing greenhouse gas emissions. It is designed to promote energy efficiency, encourage employment and stimulate investment in new types of energy.
The CCL has not led to higher taxes for industry as a whole and there is no net gain for public finances. The money raised from the Levy to businesses is principally returning via a cut in the rate of employers' National Insurance by 0.3 percent.
Other related measures
Several other measures have also been put in place to help businesses become more energy efficient:
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100 percent first year capital allowances for energy saving investments. Businesses making qualifying investments can deduct the full costs of these from their corporation tax or income tax bills. The Carbon Trust manages the Enhanced Capital Allowance scheme. Contact them directly with any enquiries on 0800 085 2005 or visit the ECA website
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an exemption from the CCL for electricity generated from 'new' renewables (such as solar power and wind power – but not large-scale hydro-electric schemes or some energy from waste)
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an exemption from the CCL for the fuel input to 'good quality' combined heat and power. This combined heat and power has to be verified by the CHP Quality Assurance Programme.
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The Carbon Trust also provides a range of products and services to help businesses reduce their carbon emissions. You can find details on the Carbon Trust website or call their helpline: 0800 085 2005.
Who does the CCL apply to?
The CCL applies to industrial and commercial energy supplies to the industrial, commercial, agricultural, public and service sectors.
It does not apply to:
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fuel used by domestic consumers or the transport sector
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fuel used for producing other forms of energy (such as electricity) or for non-energy purposes
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energy used by registered charities for non-business use
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domestic level energy used by very small firms (roughly equivalent to the energy used by a six-bedroom house)
What kind of energy is taxable under the CCL?
Energy subject to the CCL includes: natural gas, electricity, petroleum and hydrocarbon gas in liquid form, coal, lignite and coke.
The CCL does not apply to:
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oils, which are already subject to excise duty
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electricity generated from new renewable energy (such as solar and wind power)
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fuel used by ‘good quality combined heat and power’ schemes
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fuel used as a feedstock
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electricity used in electrolysis processes, such as the chlor-alkali process, or primary aluminium smelting.
What are the current CCL rates?
You can find the latest CCL rates on the HM Revenue and Customs website.
The CCL is added to energy bills before VAT and, although there is no legal requirement to itemise it, it often appears as a separate item on bills.
Who should I contact for more information?
The following web pages or sites include more information about the CCL:
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Emissions Trading Scheme (ETS) – includes details of how CCA holders can use the UK registry to buy or sell carbon allowances, and explains the changes to UK ETS rules relating to CCA reporting;
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The HM Revenue and Customs website also has further information on the design and implementation of the CCL;
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For CCL administration enquiries, please contact HM Revenue and Customs (HMRC), by email at Enquiries.estn@hmrc.gsi.gov.uk or phone on 0845 010 9000.