ESOS · exemptions and exclusions
ESOS exemptions: who is out, and who only does less
ESOS has two true exemptions, both in regulation 16: public bodies, and undertakings in insolvency proceedings between the qualification date and the compliance date.
Everything else people call an ESOS exemption either keeps you out because you are not large, or keeps you in with fewer duties: zero consumption, under 40,000 kWh, or an ISO 50001 certificate.
The checks below apply the size test and the two-period rule to your own accounts.
Four kinds of relief
Excluded, not qualifying, deemed, or relieved of one duty
The word “exemption” covers four different legal positions, and only the first two take an organisation out of ESOS.
| Position | Who | What is still owed | Provision |
|---|---|---|---|
| Excluded | Public bodies; undertakings in insolvency proceedings between qualification and compliance date; SME group members of an insolvent large undertaking with no solvent large undertaking left | Nothing under ESOS, but keep proof; a public body claim is explained in the notification | reg 16 |
| Not qualifying | Undertakings that are not large on the qualification date, after the two-period rule, and are in no group with a large UK undertaking | Tell the regulator if you qualified before or it has contacted you | Sch 1; reg 15 |
| Deemed compliance | Zero energy consumption; ISO 50001 over all total or all significant consumption | Notification in every case; on the ISO route, measurement, ratios, evidence pack and action plan too | regs 33, 33A |
| One duty disapplied | Total consumption under 40,000 kWh | Everything except the lead assessor; two responsible officers confirm | reg 21(3); reg 30(3A) |
Deemed compliance is a different idea from exemption: SI 2026/701 renamed Part 6 of the Regulations from “Alternative routes to compliance” to “Deemed compliance with Scheme requirements”, and the duty is treated as discharged, not removed.
That is why every deemed route still ends in a notification through MESOS, covered on the ESOS notification page.
Public bodies
The public sector exclusion, and its new definition
A public body is not a relevant undertaking, so it is outside ESOS entirely, under regulation 16(1)(a).
The definition changed on 24 February 2025: regulation 16(2)(b) now refers to a public authority within the meaning of the Procurement Act 2023, other than certain excluded authorities, and, for a devolved Scottish authority, to a contracting authority under the Public Contracts (Scotland) Regulations 2015.
The Environment Agency’s Phase 4 guidance still describes the earlier test, under the Public Contracts Regulations, so where the two differ the Regulations govern.
The guidance’s practical points still hold: an organisation that only voluntarily follows public procurement rules must participate, and a private contractor working for a public body assesses its own qualification in the normal way.
Higher education is the case most often misread: the guidance says ESOS applies to higher education institutions that self-declare as private sector and meet the other requirements.
A public body claim is not silent: the guidance asks the organisation to explain its basis when it notifies, and to keep proof in an evidence pack for any later enquiry.
Insolvency
The insolvency exclusion, widened for Phase 4
Before 22 July 2026 an undertaking was excluded only if it was in insolvency proceedings on the qualification date.
Regulation 6 of SI 2026/701 widened that to insolvency proceedings at any point in the period beginning with the qualification date and ending with the compliance date: for Phase 4, 31 December 2026 to 5 December 2027.
It also added a group limb: a small or medium undertaking brought in only by a large group member is excluded where that large undertaking is in insolvency proceedings and no other large, solvent undertaking remains in the group.
“Insolvency proceedings” now means proceedings under Parts A1 to 6 of the Insolvency Act 1986 or Parts 1A to 7 of the Insolvency (Northern Ireland) Order 1989.
The guidance adds the obvious corollary: where only part of a group is excluded, the rest of the group still participates if it qualifies.
Not large
Leaving ESOS takes two consecutive periods
The size test is in Schedule 1: at least 250 persons employed, or an annual turnover in excess of £44 million together with an annual balance sheet total in excess of £38 million.
Paragraph 11 then makes status sticky: an undertaking that is large keeps that status until it falls within the small or medium definition for two consecutive accounting periods, and the same works in reverse for a growing company.
The guidance’s own example shows why one bad year proves nothing: a company that met the test in 2022 and 2023, fell below it in 2024, met it in 2025 and fell below it again in 2026 is still large.
A company that met the test in 2022 and 2023, fell below it in 2024 and 2025 and then met it in 2026 is not large, because its last matching pair was small.
There is no limit on how far back the look goes, the guidance says, and an undertaking that has never had two consecutive years at the same size takes the size of the year it was formed.
Status is fixed on 31 December 2026: a change in size afterwards does not affect Phase 4, and the next test is on 31 December 2030.
The panel beside this text applies paragraph 11 to a run of accounting periods; the ESOS overview applies the underlying test to one set of figures.
Two consecutive periods · Sch 1 ¶11
List the undertaking’s accounting periods oldest first, ending with the accounts for the financial year ending on, or in the twelve months before, 31 December 2026.
Mark each period large if it met the test on its own figures: at least 250 persons, or turnover over £44 million and a balance sheet over £38 million.
- Period 1
- Period 2
- Period 3
- Period 4
- Latest period
Status on 31 December 2026: not a large undertaking
Decided by periods 3 and 4, the latest two consecutive periods at the same size.
The latest period alone points the other way, but one period is not enough to change status under paragraph 11.
SI 2014/1643 Sch 1 ¶¶1, 1A, 11; Environment Agency Phase 4 guidance §1.6.
Run it for each UK undertaking in the group.
An orientation aid, not advice.
The size test
Run the Phase 4 test on one set of figures
The test is applied to each UK undertaking separately, not to consolidated figures, so a group reporting consolidated accounts still checks each member.
Headcount is the monthly average over the accounting period used for the money figures, counting employees, owner managers and partners; part-time staff count as one person each.
The drafting is asymmetric: exactly 250 people is large, but exactly £44 million of turnover is not, and the two money limbs must both be exceeded.
One large UK member brings every small or medium UK member of its group into the scheme under regulation 15(1)(b).
The group and joint-venture edge cases are set out on the ESOS requirements page and in the Phase 4 compliance guide.
Schedule 1 test · one UK undertaking at a time
Enter the three figures to see a provisional position.
A provisional reading of SI 2014/1643 Schedule 1 and regulation 15, not advice.
Insolvency, public-body status and group structure can change the answer.
Overseas groups
Overseas parents and UK establishments
An overseas organisation with UK energy supplies but no UK establishment employing at least 250 people in the UK does not need to participate, the guidance says, unless another part of its global group’s UK activities meets the criteria.
The GOV.UK ESOS page puts the other side of that rule: a UK registered establishment of an overseas company must take part, whatever its own size, if any other part of the group’s UK activities qualifies.
Only UK energy is counted: the guidance puts energy consumed outside the UK and the offshore area out of scope.
Zero energy
Zero consumption: deemed done, but still notified
New regulation 33A, inserted by SI 2026/701, applies where the responsible undertaking has calculated the participant’s total energy consumption as zero kWh.
The participant is then deemed to have complied with regulations 20, 21 and 21A(2)(b), Chapters 2A to 4 of Part 4, and Part 6A: no assessment, no lead assessor, no report and no action plan or progress updates.
The guidance gives the typical case: an undertaking that exceeds the financial thresholds but has no physical assets or employees using energy.
It must still notify, and two directors or equivalent confirm that although it qualifies, it has no energy responsibility; it also keeps records showing it has no consumption.
Low consumption
Under 40,000 kWh: no lead assessor, everything else stays
Regulation 21(3), inserted by the 2023 amendments, disapplies the lead assessor regulation where total energy consumption is less than 40,000 kWh.
The test is exclusive: at exactly 40,000 kWh a lead assessor is still required.
The SECR low-energy relief uses the same number differently, at 40,000 kWh or less in the UK, so one company can be relieved under SECR and still need an ESOS lead assessor.
Without an assessor, regulation 30(3A) requires two responsible officers instead of one, and the audit, the report, the evidence pack and the action plan all remain.
The ESOS lead assessor page covers the cases where an assessor is required.
ISO 50001
ISO 50001: a deemed route, not an exemption
A certified ISO 50001 energy management system that covers all of a participant’s total, or all of its significant, energy consumption deems three duties done: appointing a lead assessor, carrying out the audit and producing the ESOS report.
The certificate must have been issued on or after 6 December 2023, be valid on 5 December 2027, come from an accredited certification body, and be to ISO 50001:2018 or the 2011 edition.
A certificate over part of the consumption covers only that part, and the rest is audited.
The choice between the routes is set out on ISO 50001 and ESOS.
De minimis and sub-metering
The 5% you can leave out, and the meters you do not need
Identifying significant energy consumption is optional, but a participant that does so may leave out up to 5% of its total, because the significant areas must make up not less than 95%.
The guidance says you can classify whichever activities you choose as de minimis, and the 95% may be measured in energy units or by energy spend.
ESOS does not require sub-metering: the duty is to use verifiable data where reasonably practicable, and a reasonable estimate otherwise.
The guidance’s worked examples deal with the common case directly: where one metered supply serves a building and vehicle chargers with no sub-metering, the subtotals for each purpose are estimated and the method kept in the evidence pack.
Where tenant use is sub-metered and recharged, only the energy the participant is responsible for, such as landlord-paid common areas, belongs in its total.
The ESOS energy audit page works the 95% floor on your own figures.
What is not an exemption
Six reasons organisations think they are out, and are not
Being in another scheme. CCAs, the UK ETS and SECR do not automatically count as ESOS compliance; their data helps, and the audit duty remains.
Shrinking after the qualification date. Status is fixed on 31 December 2026 for the whole of Phase 4.
One small year. The two-consecutive-period rule keeps large status until two periods below the test.
Being a small subsidiary. A small UK member of a group with a large UK member is in.
Low energy use. Under 40,000 kWh removes the lead assessor, not the assessment.
Having done Phase 3. Each phase is a new assessment, and Phase 3 progress updates continue alongside it.
An organisation that is genuinely out but qualified before, or has been contacted, tells its regulator; the instruments behind each rule are on ESOS legislation, the regulator’s overview on ESOS compliance guidance, and the scheme’s history on the Energy Savings Opportunity Scheme.
An organisation outside ESOS can still carry out an assessment voluntarily.
MESOS does not accept submissions from voluntary participants, so the guidance suggests publishing results in your own reports or website.
True or false?
01An undertaking that entered administration in March 2027 is excluded from Phase 4.
02A participant using 40,000 kWh exactly needs no lead assessor.
03Large last year, small this year: out of ESOS.
04A company with zero energy consumption files nothing.
05A private company that voluntarily follows public procurement rules is a public body for ESOS.
06A small UK subsidiary of a large UK company takes part in ESOS.
6 statements.
Pick an answer to see the provision behind it.
Answers rest on the provisions named beside each one.
Nothing you pick is saved.
Frequently asked
ESOS exemptions, answered
Who is exempt from ESOS?
Two kinds of undertaking are excluded by regulation 16: public bodies, and undertakings subject to insolvency proceedings at any point between the qualification date and the compliance date, together with small or medium group members of an insolvent large undertaking where no solvent large undertaking remains in the group.
Undertakings that do not meet the size test, after applying the two-consecutive-period rule, are simply outside the scheme.
Are public sector organisations exempt from ESOS?
Yes, public bodies are not relevant undertakings.
Since 24 February 2025 regulation 16 defines a public body by reference to a public authority under the Procurement Act 2023, or for a devolved Scottish authority a contracting authority under the Public Contracts (Scotland) Regulations 2015.
An organisation claiming the exclusion must explain its basis in the notification and keep proof in an evidence pack.
Are universities exempt from ESOS?
Not automatically.
The Environment Agency says ESOS has been implemented on the basis that it applies to higher education institutions that self-declare as private sector and meet the other qualification requirements.
Is there an ESOS exemption for low energy use?
Not from the scheme.
A participant whose total energy consumption is less than 40,000 kWh needs no lead assessor under regulation 21(3), but it still carries out the assessment and audit, and two responsible officers must confirm it.
A participant with zero consumption is deemed to have done the assessment under regulation 33A, but still notifies.
Is exactly 40,000 kWh below the ESOS threshold?
No. Regulation 21(3) applies where total consumption “is less than 40,000 kWh”, so a participant at exactly 40,000 kWh must appoint a lead assessor.
The SECR low-energy relief is worded differently, at 40,000 kWh or less in the UK.
Does ISO 50001 exempt us from ESOS?
It deems three duties done where the certificate covers all total or all significant consumption: appointing a lead assessor, carrying out the audit and producing the ESOS report.
The participant still measures its consumption, notifies through MESOS, keeps an evidence pack and produces an action plan.
We shrank below the threshold. Are we out of ESOS?
Only once you have been below the test for two consecutive accounting periods: Schedule 1 paragraph 11 says an undertaking retains its large status until then.
A change in size after the qualification date of 31 December 2026 does not take you out of Phase 4.
Does ESOS require sub-metering?
No. The Regulations require verifiable data where reasonably practicable and reasonable estimates otherwise.
The guidance’s examples use estimates where one metered supply serves more than one purpose and there is no sub-metering, with the method recorded in the evidence pack.
What if we qualified for Phase 3 but not for Phase 4?
Tell your regulator.
The GOV.UK ESOS page says an organisation that has previously been contacted by its regulator, or qualified for any previous phase, but does not qualify for Phase 4 needs to tell its regulator it does not qualify.
Does a Climate Change Agreement exempt us from ESOS?
No. The Environment Agency says participation in CCAs, the UK ETS, SECR and similar schemes does not automatically count as ESOS compliance.
Their data can feed the ESOS calculation, and a CCA audit can count as an ESOS audit if a lead assessor conducted, verified or reviewed it and it meets the ESOS minimum standards.
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner.
Secondary commentary is never the source for a number.
- legislation.gov.ukSI 2014/1643, regulation 16 — excluded undertakings
Public bodies and insolvency; the public body definition now runs through the Procurement Act 2023.
- legislation.gov.ukSI 2014/1643, Schedule 1 — the meaning of large undertaking
The size test and the two-consecutive-period rule (¶11).
- legislation.gov.ukSI 2014/1643, regulation 21 — the lead assessor
Paragraph (3): no lead assessor below 40,000 kWh.
- legislation.gov.ukThe Energy Savings Opportunity Scheme Regulations 2014 (SI 2014/1643)
Regulations 33 and 33A on the deemed routes.
- legislation.gov.ukThe Energy Savings Opportunity Scheme (Amendment) Regulations 2023 (SI 2023/1182)
Inserted the 40,000 kWh limb and the 95% floor.
- legislation.gov.ukThe Energy Savings Opportunity Scheme (Amendment) Regulations 2026 (SI 2026/701)
Widened the insolvency exclusion (reg 6) and inserted the zero-consumption route (reg 25).
- Environment AgencyHow to comply with ESOS phase 4, sections 1.2 to 1.6 and 4.7
Who does not qualify, overseas organisations, zero energy supplies, the two-period examples.
- Environment AgencyComply with ESOS phase 4 — publication page
The summary of the Phase 4 changes, including the wider insolvency exemption.
- Environment AgencyComply with the Energy Savings Opportunity Scheme (ESOS): phase 3
The Phase 3 guidance, which set out the same public body and overseas rules for the third period.
- GOV.UK (Environment Agency)Energy savings opportunity scheme (ESOS): find out if you qualify and how to comply
Public sector, overseas establishments, and telling your regulator you do not qualify.
- GOV.UKEnvironment Agency
The scheme administrator and the regulator for England.
- ISOISO 50001:2018 — energy management systems
One of the two editions regulation 33(4) recognises.