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Whether VAT applies to the payment made under the Energy Bills Support Scheme is determined
by VAT legislation. Under the Scheme, the government is paying £400 of the domestic
customer’s energy bills. Payments made under the scheme into the customers energy
account are regarded as third-party payments from the government. Energy suppliers
are required to account for VAT at the reduced rate of five percent under the normal
rules, as the payment is made for a taxable supply of energy. There are no plans to
review the VAT legislation.
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