Do you need a business energy deal?

If you run a large business or SME, it makes sense to take out a business energy deal as you can often negotiate cheaper gas and electricity rates than if you have a domestic energy deal at your business premises. But what if you work from home or run a micro business?

What is a micro business?

A micro business is one that one that operates on a very small scale, but there are various definition of exactly what a micro business is:

The European Union (EU) defines a micro business as  definition of a micro business is one that has less than 10 employees and has a turnover or balance sheet of less than €2 million (£1.7 million).

The Office for National Statistics (ONS) defines a micro business as a subset of Small to Medium Enterprises (SMEs), which differ from SMEs as they tend to be owner-manager entrepreneurial (OME). And, as with the EU definition, SMEs consist of teams fewer than 250 employees, microbusinesses have a headcount of up to just nine employees.

Her Majesty’s Revenue and Customs (HMRC) define a micro business as one that has less than 10 employees and a turnover under £2 million.

Ofgem, the UK energy regulator, defines a micro business as one that:

  • Uses less than 200,000 kWh of gas a year, or
  • Uses less than 55,000 kWh of electricity a year, or
  • Has fewer than ten employees (or their full-time equivalent) and an annual turnover or annual balance sheet total not exceeding € 2 million.

Does your micro business need a business energy deal?

If your business meets the Ofgem definition of a micro business, then you should take out a business energy deal designed specifically for your type of business – you’ll benefit from the cheaper rates offered to business owners without the restrictive terms of a SME and large business energy deal.

While SMEs and large businesses are tied into their business energy deal for the entire duration they signed up for – there’s no early release clause and once you sign up, you’re locked in – micro business energy deals are much more like domestic deals and benefit from the following:

  • The maximum notice period for terminating a micro business contract is 30 days
  • Suppliers must include the current prices, new prices and annual consumption on renewal letters for fixed-term contracts to make comparisons easier; and
  • Suppliers must take all reasonable steps to acknowledge termination notice within five working days of receipt.
  • Micro-businesses on fixed-term contracts should now receive a renewal letter from their supplier around 60 days before it ends.

Do you need a business energy deal if you run your business from home?

If you run your business from home and at least half of the energy you use if for business purposes – including computers, lighting and heating, but not things like fridges and freezers – then you can get a business energy deal. The same applies if you work from home.

It’s worth doing your sums before you sign up for a business energy deal though as, although rates are often cheaper, the rate of VAT you pay is higher on business energy than domestic energy – 20% compared to 5%.

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