Why many GP surgeries are overpaying VAT on their energy bills

Running a GP surgery comes with constant financial pressure. Rising costs, tight budgets and the need to protect patient care mean every pound has to count. But many practices are losing money unnecessarily because of how their energy bills are taxed.

Across the UK, a surprising number of surgeries are being charged 20% VAT on their gas and electricity when they should only be paying 5%. It sounds like a small detail, but the impact can be thousands of pounds slipping away each year.

How VAT on energy is supposed to work

Energy used for domestic purposes, such as households or qualifying charities, is taxed at 5% VAT. Non-domestic or purely commercial energy use is charged at the standard 20%.

GP surgeries are in a grey area. They aren’t commercial in the same way as a shop or an office, but neither are they treated the same as households. The rules say that if at least 60% of the energy is for “residential” or “non-business” use, then the lower 5% VAT rate applies.

That covers places like care homes, hospices, and crucially, many GP practices. A waiting room with heating, lighting and hot water for patients counts towards that residential use.

Why GP surgeries often get billed at 20%

The problem is that suppliers don’t automatically apply the reduced rate. Unless a surgery formally declares that it qualifies, the supplier will default to 20%.

This can happen because:

• The practice hasn’t been told it needs to claim the lower rate
• The VAT declaration form was never completed or was filled in incorrectly
• A change in supplier reset the account to 20% without anyone noticing

None of this means the practice isn’t entitled to the lower rate, it just means the paperwork hasn’t caught up.

What overpaying means in real terms

On a large surgery using £30,000 of energy a year, paying 20% VAT instead of 5% means an extra £4,500 straight off the budget.

That’s money that could have gone towards:

• Hiring an extra pair of hands to ease admin pressure
• Covering rising equipment costs
• Simply keeping reserves healthier in an uncertain climate

Instead, it quietly drains away on the bill, often for years before anyone notices.

The knock on impact on NHS budgets

Most practices are already balancing tight finances. Paying more VAT than necessary makes that pressure worse. It limits flexibility, adds to stress, and means less money for patient services.

What makes it frustrating is that it isn’t a new cost, just an error that never got corrected. Surgeries end up carrying the weight of something that’s entirely avoidable.

Can it be fixed?

The good news is yes. Surgeries can:

• Submit a VAT declaration to their supplier confirming they qualify for the 5% rate.
• Apply for refunds on past overpayments – often going back up to four years.

It doesn’t require complex financial expertise, but it does need awareness and the right paperwork in place.

A practical next step

If you’re not sure what VAT rate your surgery is paying, it’s worth checking your energy bill today. If it shows 20%, there’s a strong chance you’re entitled to reduce it and reclaim what you’ve overpaid.

That’s money back into your budget, where it belongs, supporting the work your team does every day. And if the process feels unclear, Troo can step in to guide you through it and make sure you don’t miss out on the savings you’re entitled to.

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