With ongoing government attempts to reduce the environmental impact of UK businesses, various levies and taxes have featured in the spotlight recently. One of those being the Climate Change Levy.

Introduced in 2001, the Climate Change Levy (CCL) is designed to make UK businesses more sustainable by promoting the efficient use of energy and reducing greenhouse gasses. In short, it aims to encourage businesses to consider their use fuel and compensates their impact on the environment as much as possible.

How does the Climate Change Levy work?

The CCL is a surcharge on fuel provided by one business for use in another business such as for heating, lighting, and power purposes.

Types of fuel included are natural gas, electricity, petroleum, and coal. However, it doesn’t apply to fuels that have excise duty added to them, such as on-road fuel for vehicles, or oil that has already been taxed. Fuels that are exempt from the Climate Change Levy are

• Mineral oils
• Red diesel
• Paraffin
• Household refuse
• Waste paper
• Sewage gas
• Landfill gas

The CCL is collected by the fuel supplier and paid to the government on a quarterly basis. There is no registration threshold for the levy, and if a company supplies or intends to supply liable fuels it must register with HMRC. If a company is a liable and doesn’t register, HMRC can register them compulsorily and may impose a penalty.

 

Climate Change Levy Rates

There are two rates within the CCL and how much you pay depends upon how much fuel you use. Most businesses will pay the Main Rate which is charged per kilowatt per hour (KWh) for gas and electric, and per kilogram (kg) for other fuels like coal.

There is also a Carbon Price Support Rate (CPS) which is paid by the owners of electricity generating systems and operators of combined heat and power (CHP) stations. Businesses that generate their own power and sell excess power back to the grid for a profit will usually be exempt from this charge though.

Some supplies are excluded or exempt from the levy and some have a reduced or half-rate applied. You can find a full list of these supplies in this article from Sage.

 

How to record the Climate Change Levy in Sage 50 Accounts

If you are a registered CCL supplier, you’ll need to record the charges in your Sage 50 Accounts software.

Firstly, you’ll need a nominal code for the Climate Change Levy which you can create using the following steps taken from the same Sage article.

1. Open the Company module and select Nominal Ledger from the Links

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.
	Enter the name of the account, for example, Climate Change Levy.

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

Once you have your nominal code, you’ll also need to create a product record for the Climate Change Levy. Sage has provided the below information to help you do this

“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.

Open the Products module, then click Product Record.

Sage Accounts 2012 and below – Open the Products module, then click Record.

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.

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.

 

Adding the Climate Change Levy to a Sage 50 Accounts Invoice

If your business is registered to collect the CCL, you’ll need to include this information on the invoice you provide for your clients.

Sage provides the following steps to do this

“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.

 

Sage 50 Accounts Training

If you need further advice on using your Sage software to record Climate Change Levy transactions our qualified Sage trainers are here to help. We offer remote Sage training, onsite Sage training, and online courses or self-study manuals too.

Discover our Sage 50 training options.