Large UK businesses have urged the government to remove taxes from electricity bills for companies, arguing that the move would help soften the impact of rising energy prices and make Britain more competitive. OilPrice reported this, citing a letter shared with Bloomberg News.
In July, UK Prime Minister Andy Burnham announced, as one of the first steps of the new Labour government, that it would scrap the 5% value added tax (VAT) on household electricity bills. The government said the measure was intended to help Britons cope with rising energy costs.
Suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs. The government also said the cost of removing VAT from electricity bills would be funded by cancelling the $2.4 billion (£1.8 billion) Digital ID program.
The tax cut is due to take effect on October 1 so it can influence the next Ofgem price cap update for household energy bills. According to the report, UK energy bills are heading for a three-year high at the start of winter after higher gas prices linked to the Iran war prompted Ofgem to raise the household energy price cap by 4% for October through December.
Business groups are now calling for similar treatment for companies as well. They say British industry is struggling with elevated energy costs this year as oil, gas, and electricity prices have surged again in the wake of the Iran war.
“Moving electricity levies from both business and household bills to government spending would immediately make energy costs more affordable and competitive,” British industry groups wrote in a letter to UK Chancellor John Healey. They added that such a move “would address distortions that undermine investment in electrification.”
