Posted: Fri 2nd Nov 2012
Energy prices are very much at the forefront of the concerns of small businesses* - especially with winter approaching. So we were pleased to receive this post from Energy Forecaster, which works with small businesses to help them reduce their energy costs. Here, Energy Forecaster's chairman James Constant offers seven tips to help you decide whether your home enterprise should be on a business tariff.
If you are thinking of starting your own business, you may be considering the option of running it from the comfort of your own home, writes James. Not having to rent or buy an additional property means you can invest more money into your business, as well as avoid wasting time and money on travelling to and from work. However, if you do work from home often, one thing you may not have thought about is how your energy bills will be affected. You will use lights, heating, your computer, your printer and other facilities much more frequently than if you were out at work all day. On average, businesses pay a far lower unit rate than homes, so opting for a business tariff for your home might be a wise decision. There are however, a number of factors and possible extra charges you need to consider before doing so. We at Energy Forecaster have come up with seven useful points for those of you that work from home to consider before deciding whether or not to switch to a business tariff.
1. Proportion of energy use
In order to switch to a business tariff at home, you must use a significant proportion of energy in your home for business purposes. This proportion will differ between energy suppliers, but if you work from home all day every day, it's quite likely that you will reach most suppliers' benchmarks. When you are calculating the split between energy used while working and energy used for other purposes, remember to take into account things like your fridge which would be using electricity all day whether or not you were working from home.
2. Can you prove you run a business?
If you are running your own business from your home, you will need to be registered as a business, have a business rates document and proof that your business exists before you will be able to switch to a business tariff. The energy supplier will want to see something to confirm that you really do have a business.
3. Make sure you're ready to commit
You don't need to get a new meter to switch to a business tariff, your old meter will just be given a new 'profile'. However, your meter can't be switched back again, so if you want to return to a domestic tariff, you'll have to have a new meter installed, which you might be charged for.
4. Business tariffs are fixed price
This means that you'll pay the same rate from the day you sign your contract to the day it ends. On the one hand this is reassuring, because it helps you to budget and it protects you from price rises; on the other hand in the rare event that prices fall, the unit rate and standing charge you pay will stay the same. You can't switch while you're still in a contract, unless you pay the full value of the contract outright, which will be expensive.
5. Protect yourself
Some business energy customers don't get the same protection as domestic energy customers from Consumer Focus and Ofgem. If you're running a business from home though, you may well fit the definition of a microbusiness, which means you do get some protection. See our guide to business energy regulation to find out more.
6. Don't forget the extra charges
If you have a domestic energy tariff, you'll only pay 5 per cent VAT on your energy, while businesses typically pay 20 per cent. Businesses also have to pay the Climate Change Levy or CCL, at a rate of 0.509 pence per kWh for electricity and 0.177 pence for gas. While there are some circumstances where these will not apply, these extra charges are likely to push up the cost of business energy when you compare it to domestic, so don't just take unit rates at face value.
7. Claim energy as an expense
Whether you're on a business energy tariff or a domestic energy tariff, you can claim the electricity and gas you use while you're working as a business expense. You can claim for your energy usage by the proportion of the area of your house that your office or workspace occupies or according to the amount of energy your business accounts for. Energy Forecaster is working to make small and medium-sized businesses understand that energy is not a cost to simply be accepted, but a potential source of saving.
* Energy Forecaster's quarterly Business Energy Barometer, which surveys 500 businesses, found in August that a third of UK businesses think they would face catastrophic or very serious consequences if energy bills continue to rise by 15 per cent every year. Photo credit: Joel Bombardier
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