Font Size

HM Revenue and Customs Brief 28/14 - Reverse Charge for Gas and Electricity


HM Revenue and Customs -Tax Authorities

Tax Articles
Submit Articles   Back to Articles

Issued 15 August 2014

VAT: domestic reverse charge for businesses wholesale trading in gas and electricity - further information on Revenue & Customs Brief 23/14


The reverse charge for domestic gas and electricity took effect from 1 July 2014. This brief supplements and clarifies the guidance published in RCB 23/14.

Who needs to read this

Those who have read RCB 23/14 and businesses registered or liable to be registered for VAT that buy or sell wholesale gas and electricity in the UK.

Power Purchase Agreements (PPAs)

RCB 23/14 indicated that PPAs are all wholesale supplies and subject to the domestic reverse charge. However, that is not always the case, particularly with renewable and embedded generation, and with auctions carried out by the Non-Fossil Purchasing Agency (NFPA).

This brief clarifies that your supply of electricity is excluded from the domestic reverse charge as a non-wholesale supply if:

  • you sell your generated power under a PPA or similar contract, and
  • you are a generator that is exempted from holding a generating licence, and
  • your generation capacity by asset is 100MW or less, and
  • the generated volume is not allocated to your production account with Elexon (or the generator account with the Single Electricity Market Operator (SEMO) in Northern Ireland)

Similarly, if your generated power is sold to the NFPA, NFPA Scotland Ltd or NFPA Services Ltd and the generated power is not allocated to your production account with Elexon or generation account with SEMO, that power is excluded from the domestic reverse charge. The sale of the power by the NFPA by auction is also excluded from the domestic reverse charge.

Any associated LEC's, ROC's and any other incidental supplies which are covered by the PPA or similar contract will also be excluded from the domestic reverse charge.

Incidental supplies and certain exclusions

Paragraph 4.3 of RCB 23/14 listed certain specific supplies where the domestic reverse charge would not apply. This brief clarifies that where these supplies are incidental to a domestic reverse charge supply then they will also be subject to the domestic reverse charge.


Businesses that are currently unable to itemise on their sales invoices the amount of VAT to be accounted for under the reverse charge mechanism need to make clear on their invoices that it is the customer's responsibility to account for the VAT. In such cases the wording should state that VAT is to be accounted for by your customer at the standard rate of VAT, based on the VAT exclusive selling price for the reverse charge supply. Your customer must be able to identify the reverse charge goods or services, and a legend such as the following is recommended:

  • Reverse Charge: Customer to account to HMRC for the reverse charge output tax on the VAT exclusive price of items marked reverse charge


As a result of this further guidance some business may find that they have applied the domestic reverse charge to supplies where normal VAT accounting should apply.

In these cases, HMRC is content, subject to both parties agreeing, that any reversion back to normal VAT accounting rules takes place from a future date provided that the VAT is accounted for properly under the domestic reverse charge.

Alternatively, businesses will need to issue credit notes for the reverse charge invoices that have already been issued and reissue normal VAT invoices for the affected period. Where someone has yet to apply the domestic reverse charge but needs to do so following this guidance they should apply it from a current date.

About the Author

p> Crown Copyright 2014.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs.

Follow us @Scopulus_News

Article Published/Sorted/Amended on Scopulus 2014-08-18 13:30:13 in Tax Articles

All Articles

Copyright © 2004-2021 Scopulus Limited. All rights reserved.