How to record the Climate Change Levy - UK only

Information

What fuel types does the Climate Change Levy apply to and who pays it

The Climate Change Levy applies to the following fuels:

• Electricity
• Natural Gas
• LPG
• Coal and lignite
• Coke and semi-coke of coal or lignite
• Petroleum coke
• Petroleum and hydrocarbon gas in a liquid state

Note: Different fuel types have different levy rates.

The Climate Change Levy does not apply to the following:

• Mineral Oils
• Red diesel
• Diesel
• Paraffin
• Household Refuse
• Waste Paper
• Sewage Gas
• Landfill Gas

Businesses within industry, commerce and agriculture as well as public bodies are liable to pay the Climate Change Levy. Charities are also included if they operate a business, but the levy is reduced. If a VAT rate of 5% is paid on the fuel, it is not subject to the levy.

There is no registration threshold for the levy, if you supply or intend to supply fuels which are liable for the levy you must register with HMRC.

Reliefs, special treatment and special arrangements

Some supplies are excluded or exempt from the levy, and others have a reduced or half-rate. The following supplies are exempt:

• Supplies not for burning or consuming in the UK, such as export or resale other than gas or electricity.
• Supplies used in some forms of transport.
• Supplies used to produce taxable commodities other than electricity.
• Supplies (other than self supplies) to various categories of electricity producers including CHP (combined heat and power) schemes.
• Supplies from certain CHP schemes.
• Supplies by electricity producers that are self supplies in specific circumstances.
• Supplies not used as fuel including dual-use as fuel and feedstock.
• Supplies of electricity from renewable sources.
• All domestic supplies.

Special arrangements are available for:

• Horticulture
• Northern Ireland
• Combined Heat & Power plants
• Electricity generators

There are various exemptions and special arrangements regarding when the levy applies. For full details, contact HM Customs & Excise or visit the HMRC website.

How the levy calculates

The levy is applied as a specific rate per nominal unit of energy. There is a separate rate for each category of taxable commodity. For information about what the current rates are please visit the Climate Change Levy pages on HMRC's website at www.HMRC.gov.uk

Registration and general notes

There is no registration threshold for the levy - if a company supplies or intends to supply fuels which are liable for the levy they must register with HM Revenue & Customs (HMRC). If a company has to register but doesn't, HMRC can register them compulsorily, and they may have to pay a penalty.

To register, complete form CCL1 (available from www.hmrc.gov.uk) and send it to HMRC within 30 days of becoming liable to register.

General Climate Change levy notes

• No registration threshold.
• Customs must be informed of all supplies of taxable commodities.
• There is a separate return for the levy, at quarterly periods.
• Levy charges are subject to VAT at 20%.
• Penalties will be raised for non-payment.
• This is a non reclaimable levy.
• Employer's NI contributions are to be reduced by 0.3% which is the approximate calculated value of the levy.
• The levy is paid at the time of supply.
• VAT Rules are used to distinguish between private and business supplies, for example, if fuel is supplied at reduced VAT then the supply is classed as private. VAT is charged on the levy as part of the supply.

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Steps

The following steps contain everything you need to help you record the Climate Change Levy.

To create a nominal code for the Climate Change Levy

If you already have a nominal code for the Climate Change Levy, please proceed to the section To create a Product Record for the Climate Change levy.

1. Open the Company module and from the Links pane select Nominal Ledger.
   
   
2. Click Nominal Record and complete the Nominal Record window as follows:
   
   Sage Accounts 2012 and below - Click Record and complete the Nominal Record window as follows:
   
   

   N/C	Enter the nominal code number you want to use. This should be in the Current Liabilities area of the Balance Sheet section of the Chart of Accounts.
   Name	Enter the name of the account, for example, Climate Change Levy.

3. To save the new nominal code, click Save.
   
   
4. To close the Nominal Record and return to the Nominal Ledger window, click Close.

   After you create a new nominal code you must check your Chart of Accounts to ensure the new code is included. For further information about checking your Chart of Accounts, please refer to article .

5. To close the Nominal Ledger window, click Close.

You are now ready to create the Product Records for the Climate Change Levy.

To create a Product Record for the Climate Change levy

The levy can be charged at three rates: full rate, 50% and 20%, depending on the type of business the fuel is supplied to. A Product Record must be set up within Sage Accounts for each rate used.

Before you create the Product Records you must check that the number of decimal places available in the Product Record is sufficient to enter the correct sales price. To do this, open the Settings menu, then choose Product Defaults. In the Unit D.P. field choose the number of decimal places required, for example 5.

Note: In this example, a company supplies coal and the Climate Change Levy for coal is 1.17 pence per Kg.

1. Open the Products module, then click Product Record.
   
   Sage Accounts 2012 and below - Open the Products module, then click Record.

2. Complete the Product Record window as follows:
   
   

   Product Code	Enter the product code you want to use, for example CCLFULL.
   Type	Choose Stock Item if you want to record stock transactions, or if no stock transactions are required, choose Non-Stock. Note: This option is only available in Sage Instant Accounts Plus and above.
   Description	Enter the description of the levy, for example Climate Change Levy (Full Rate).
   Sales Nominal Code	Enter the Climate Change Levy nominal code.
   Tax Code	From the drop-down list, choose T1.
   Sales Price	Enter the levy for one unit, for example for 1 Kg of coal the levy is £0.01281.

3. To save the Product Record, click Save.

Repeat steps 2 and 3 to create Product Records for the 50% levy and the 20% levy.

You have now created your Product Records for the Climate Change Levy rates.

To add the Climate Change Levy to an invoice

When you raise a sales invoice for the fuel sold, the Climate Change Levy is charged by entering the levy product code together with the number of units charged as an additional item on the invoice. VAT is then added to the levy at 20%, unless an exempt self-supply.

Using the example of 200Kg Coal at xx price per Kg, the invoice would show:

Product Code	Description	Quantity	Unit Price	Net	VAT
COAL1	Coal	200	£xx.xx	£xx.xx	£xx.xx
CCLFULL	Climate Change Levy (Full Rate)	200	£0.01281	£2.56	£0.51

When the invoices are posted to the ledgers the value of the levy is accumulated as a liability in the Climate Change Levy nominal code.

Note: VAT is not charged on deemed self-supplies, please refer to the HMRC website for further information.

To pay the Climate Change Levy

1. Open the Bank Accounts module, then click Bank Payments.
   
   Sage Accounts 2012 and below - Open the Bank Accounts module, then click Payment.
   
   
2. Enter the relevant details on the Bank Payments window, for example, to post a payment of £1000.00 made on 01/09/2011:
   
   

   Bank	Date	Ref	N/C	Dept	Details	Net	T/C	Tax
   1200	01/09/2011	Ref	Climate Change Levy nominal code	Dept No if required	Climate Change Levy Payment	1000.00	T9	0.00

3. To post the bank payment click Save.
   
   
4. To close the Bank Payment window, and return to the Bank Accounts window, click Close.

You have now recorded the payment of the Climate Change Levy to HMRC.