Energy costs are a huge threat to many charities amid other cost and inflationary pressures. The Charity Commission’s recently updated guidance Manage financial difficulties in your charity arising from cost of living pressures offers Trustees support through difficult financial times, and specifically sites energy costs as a key issue for the charity sector.
The new guidance reminds Trustees to check that charities are obtaining all VAT reliefs and that the VAT on energy costs is appropriate for your charity. Take a look at VAT for charities: What qualifies for VAT relief for further information. Alternatively our VAT team can support you with this, please contact VAT@bhp.co.uk.
Energy Bills Discount Scheme (EBDS)
The Charity Commission also provide information around the new energy support scheme.
The current Energy Bill Relief Scheme (“EBRS”), which is supporting businesses, charities and the public sector with energy costs, will expire on 31 March 2023.
The Government has announced the replacement support scheme, the Energy Bills Discount Scheme (“EBDS”), which will roll out from 1 April 2023 for a period of one year. This scheme is hugely scaled back compared to the EBRS, in response to warnings around the sustainability of EBRS. In comparison to the £18bn of support provided over the six months that the EBRS scheme has been operational, it’s anticipated that the EBDS scheme will cost the Government £5.5m over the 12 months.
While the scheme does benefit charities and give some support over the next year, no part of the scheme gives targeted support specifically for the sector.
The new scheme will give non-domestic customers a unit discount of up to £6.97/MWh on gas and £19.61/MWh on electricity. You do not need to apply for this as it will be automatically applied if you are entitled to it. This discount will either be capped or not applied if the unit prices contracted are below the thresholds of £107/MWh for gas and £302/MWh for electricity. Or, if the discount would take them below this level, the discount would be capped so that you would pay £107/MWh for gas and £302/MWh of electricity.
Energy and Trade Intensive Industries (ETII)
A higher level of support will be available for those entities in sectors identified as being the most energy and trade intensive – these are predominantly manufacturing industries.
The Government has provided a full list of Energy and Trade Intensive Industries (ETII) and a link can be found here.
The following sub-sectors, in which charities do specifically operate, have been identified as ETII:
- Library and archives
- Museums
- Operation of historical sites and buildings and similar visitor attractions
- Botanical and zoological gardens and nature reserve activities.
The application process for ETII support has not yet been announced and clarification has been sought from the Government around the definition of ‘historical sites and similar visitor attractions’ which appears in the list. There is still some hope that all heritage specific organisations could benefit from the enhanced scheme by arguing they fall into this category.
These qualifying organisations will be entitled to a discount reflecting the difference between the price threshold, £99/MWh for gas and £185/MWh for electricity, and the relevant wholesale price. This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40.0/MWh for gas and £89.1/MWh for electricity.
You can find full details of the scheme on the Energy Bills Discount Factsheet: Energy Bills Discount Factsheet.
Charities should therefore update their budgets and cashflow forecasts to take account of the support they expect to receive from 1 April 2023 and the level of costs that will need to be funded.
For further assistance, please contact BHP Charities Partner Laura Masheder at laura.masheder@bhp.co.uk. Find out more about how our specialist Charities and Not-for-Profit team can help.
