Domestic reverse charge ― wholesale trading in electricity and gas

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Domestic reverse charge ― wholesale trading in electricity and gas
  • Background
  • Supplies included
  • Supplies excluded
  • Power purchase agreements (PPA)
  • Practical points

Domestic reverse charge ― wholesale trading in electricity and gas

This guidance note provides an overview of the scope of the domestic reverse charged applied in respect of wholesale trading in electricity and gas. This note should be read in conjunction with the Domestic reverse charge ― overview and Domestic reverse charge ― accounting requirements guidance notes.


From 1 July 2014, the domestic reverse charge must be used in order to account for VAT due on wholesale supplies of electricity and gas within the UK in order to combat increasing fraud.

Supplies included

The domestic reverse charge applies to all wholesale supplies of gas and electricity made between two UK parties unless the supply falls into one of the exemptions outlined below. This usually means a wholesale supply between two UK parties under trading contracts such as the European Federation of Energy Traders contracts, Grid Trade Master Agreements and National Balancing Point contracts and over-the-counter or spot contracts where:

  1. supplies of gas through a natural gas system situated within the UK or any network connected to a natural gas system in the UK

  2. supply of electricity

The domestic reverse charge is not applicable to supplies of gas or electricity made under a supply licence or metered supplies to domestic and business premises for their own consumption. VAT registered businesses that do not resell electricity and gas will not be affected by these changes. HMRC has stated in HMRC Notice 735, para 3.5.1 that the following are examples of supplies that will be affected by the introduction of the reverse charge:

  1. balancing mechanism imbalance settlement charges, and other gas balancing or gas reconciliation charges

  2. gas loaded onto road trucks and delivered at a

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