Back-Billing Alarm Call for Charity Rebates

£8.5k windfalls could be at risk… so act fast and here’s how

Earlier this week the industry regulator, Ofgem, announced a restriction on back-billing for charities' energy bills. In essence, your supplier can’t send you a catch-up bill for the energy you’ve used in the past - if it was over 12 months ago. Well, they can’t from November when the new rule comes into play.

These bills are usually a result of incorrect estimating by suppliers and, at present, can be backdated for three years’ worth of electricity or four years’ worth of gas - if you’ve been underpaying. Most are for less than £2,000 but some organisations have been issued with back-bills for over £20,000. Not surprisingly they make up 10% of all cases dealt with by the Ombudsman.

Suppliers are naturally worried that the new rule will make some people reluctant to send in meter readings - or prevent meter readers from entering their premises - in an effort to avoid paying for the energy that they have used in the past. Meanwhile the regulator is worried about supplier behaviour in the run up to the deadline. This could result, for example, in a sudden wave of nasty catch-up bills over the next 6 months, sharp increased in direct debits to build up bigger account credits, hefty ‘security deposits’ suddenly required when contracts are being renewed and imposing smart meters on those that don’t want them.

What’s not clear is whether it’ll give suppliers an excuse to stop paying rebates to reimburse charities who were incorrectly charged VAT and Climate Change Levy (CCL) over a year ago. This situation is a lot more common than you’d think - mainly because many charities do not know they need to submit a VAT Declaration Form in order to qualify for exemption. That’s right: the onus is on every charity to point out their charitable status to their supplier… in writing. Only then will their bills reflect the lower VAT rate of 5% and zero CCL. As a result, some charities have gone for years blindly paying 20% VAT plus an extra charge on their unit rates needlessly (it was Gordon Brown who introduced the discount for charities back when he was Chancellor of the Exchequer).

For those who’ve fallen foul, a ‘Section 80’ claim will return years’ worth of overpayments in one lump sum and, as such, has delivered unexpected windfalls for many good causes. Back of the Sofa has been responsible for a number of these cases with £8,500 being the highest rebate generated so far (a care home). The European Court of Justice has decided that 4 years is an acceptable timeframe and that is supported by HMRC guidance. However it is just that: ‘guidance’ and there is at least one energy supplier that already limits rebates to one year.


So if you are responsible for a charity’s energy bills, now would be a good time to see if you are taking full advantage of the exemption and, if not, do something about it. Indeed, it is best to get this done ahead of the new tax year (April 6th) because, if you are due a rebate, the 4 year rule changes the date to which you can go back from 2014 to 2015. 

If you are looking for any further advice or help with this, you are in exactly the right place! You can find Declaration Forms and a template Section 80 letters here:


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