You may have wondered if you’re eligible to organise a business energy contract if you are one of the many people who has started their business up from home. Our guide explains the criteria required to use a business energy tariff when working at home!
Are sole traders working from home eligible for a business energy tariff?
If you are a sole trader and you work from home, you may be eligible to organise a business energy contract. If you meet certain criteria, you will also qualify as a micro business which will allow you to receive more protection from suppliers than if you were a larger business.
What makes me a micro business?
Ofgem says you count as a micro business if you have fewer than 10 employees (or full-time equivalent) and an annual turnover or balance sheet of no more than £2 million, or you use up to 100,000 kWh of electricity a year, or up to 293,000 kWh of gas a year (Ofgem).
For contract rules, renewals, VAT and the Climate Change Levy, see our guide to micro business energy contracts.
How is a business energy contract different from a domestic one?
Business energy tariffs usually contain cheaper unit rates – meaning you could pay less for your gas and electricity. However, businesses pay higher VAT (20%) and also pay CCLs which can increase your energy costs.
Business energy contracts are usually fixed in their contract lengths and gas and electricity rates. This means you will be able to budget for your business better as you can anticipate costs, but it also means that you will need to complete your gas or electricity contract if you do not want to incur any cancellation fees.
Once you’ve agreed on a gas or electricity tariff with a supplier, they will usually purchase the energy in bulk when your contract starts. If you decide you want to cancel your contract before the determined switching period, you may incur high fees.
If you don’t renew your contract, you’ll be moved into pricey Out-of-Contract rates so it is very important that you remember when your tariff is due to finish. By renewing, you can reduce the possibility of having to pay more for the same energy usage.
Micro business electricity tariffs: what’s different
If you work from home, Ofgem says you are probably on a domestic contract, so check with your supplier first. If your home or premises is on a business contract, a few things work differently:
- No cooling-off period. Once you agree a business energy contract there is no cooling-off period, so read the terms before you say yes.
- No domestic price cap. Ofgem’s price cap covers household default tariffs. It doesn’t apply to business contracts.
- VAT and CCL. Business energy is usually charged VAT at 20% plus the Climate Change Levy. Low users can pay 5% VAT: electricity at no more than 33 kWh a day and gas at no more than 145 kWh a day are treated as domestic use for VAT (HMRC VAT Notice 701/19).
- Extra protections for micro businesses. Your supplier must give you clear contract information and tell you renewal prices before the contract ends. On evergreen contracts, termination notice is limited to 30 days.
- End dates matter. If a fixed contract ends without a new deal, you may roll onto out-of-contract or deemed rates, which are usually higher.
To see quotes for your premises, compare business electricity.
How do I qualify for business energy at home?
If you work from home, Ofgem says you are probably on a domestic energy contract, so check with your energy supplier to make sure. If you think your home should be on a business contract because most of the energy is used for your business, ask your supplier how it decides and what evidence it needs before you agree to anything.
What protection do micro businesses get in their energy contracts?
After a CMA investigation, micro-businesses now have regulations protecting them from brokers and suppliers attempting to advantage.
Energy companies are required to inform you when your end date and notice period are on all fixed-term contract bills. Micro businesses also benefit from a shorter notice period, now 30 days instead of 90 for most businesses.
Micro businesses can notify their current suppliers that they wish to switch energy contracts at any point in their contract. However, the official switch will not be completed until their current contract is completed. When it is time to renew your energy contract, suppliers must approach micro businesses and inform them of how much energy they have used throughout the contract, and what other deals are available to them for when they want to switch.
If you run your business from home, get in touch with us today. If you believe you are eligible, we can help you compare a range of business gas and electricity tariffs. Use our easy online comparison service to start comparing energy tariffs today!