HMRC has revised their VAT/tax rules regarding how a site should be charged. Essentially, all MPANs linked to the same premise (by address and postcode) must now be charged at the same VAT rate, even if one falls under de minimis.
Customer implementing HMRC’s UK De‑minimis VAT compliance rules and need to confirm whether Oracle C2M/CC&B provides standard product support for the HMRC UK De-minimis VAT rules, specifically:
VAT treatment based on Customer + Postcode + Premises-linkage + Fuel type (Gas/Electric)
Thresholds mandated by HMRC:
33 kWh/day – Electricity
145 kWh/day – Gas
Handling of VAT declarations:
≥ 60% business use → exclude from aggregation
< 60% business use → partial aggregation
No declaration → full aggregation
Could you please confirm whether these business requirements can be supported completely, partially, or not supported in C2M 2.7.0.3.0 current product version. They are upgrading to C2M 25.4
Details
HMRC is the UK's tax, payments and customs authority.
HMRC requires de minimis VAT calculations on energy bills to be done at postcode (more premise) + customer ID + energy type level, rather than at premise level. This change impacts VAT treatment, as combining consumption at postcode level could push accounts over the threshold, requiring 20% VAT instead of 5%. An audit revealed 600 accounts and 1,800 invoices affected historically.
Current complexity includes handling domestic VAT declarations (full or partial), residual consumption, and unmetered supplies with dummy postcodes. Additional clarification from HMRC is needed on these edge cases.
Reports are being developed to estimate the impact and refine logic for compliance.
Under HMRC’s new logic, some cases currently billed partially at 20% VAT should actually be billed entirely at 5%, meaning we are overcharging in those instances. Conversely, HMRC claims we are undercharging VAT elsewhere. These discrepancies highlight the need for clarification from HMRC before designing a solution. Complexity increases with partial declarations and fluctuating monthly consumption, which can move accounts above or below the de minimis threshold, making this a dynamic calculation.
To comply with HMRC’s requirements, the solution must calculate VAT at postcode + customer level on a month-by-month basis, factoring in mixed billing cycles (monthly, quarterly, half-hourly) to derive daily consumption. This adds complexity, and decisions from HMRC on edge cases (partial declarations, unmetered supplies) are still pending. These clarifications are essential before designing a workable solution.
Complexities:
- Handling full and partial VAT declarations and applying correct logic.
- Month-by-month consumption variations, which can move accounts above or below thresholds.
- Mixed billing cycles (monthly, quarterly, half-hourly) requiring daily consumption calculations for Elec
- Gas only has 1 billing cycle which is calendar month billing although you can get partial month billing for Cots etc
- Treatment of unmetered supplies with dummy postcodes, which HMRC needs to clarify.
- Both Gas and Electric are impacted, but the calculations don't crossover fuel types, So electric treated as 1 pot and gas treated as another pot
- Electric has a deminimus level of 33 KWH a day, Gas has 145 KWH a day
- ?? To enable a fix will all sites for a particular customer on a postcode need to be billed on then same bill cycle in the future
- We have to correct any mis-billing back to March 2020. We may choose to pay this under billed Vat but a system fix will need to work on historic invoices
- Termed accounts will also need to be taken into account for the dates they are active. Especially when we carry out rebilling
- What happens if we get revised NHH or HH reads or Consumption. if this increases the total customer / postcode usage how do we correct billing where needed. Is this manual through a report or automated
Current Issues:
- Some accounts are overcharged under new logic, while HMRC claims undercharging elsewhere.
- Final decisions from HMRC are needed before designing a solution.