Average rates for businesses which generate and consume electricity from their own rooftop solar panels are set to substantially increase under the draft rateable values, published by the Valuation Office Agency (VOA) (https://www.gov.uk/correct-your-business-rates) on Friday.
In some instances, business rates could soar from around £400 to £2,700 a year, based on a typical 100kW rooftop installation, causing dismay in the solar industry and across the wider green economy.
Existing legislation has resulted in complex VOA classifications, meaning that owners of solar panels are divided into two classes: one for where electricity generation is intended "mainly for export" (either to the grid or via a Power Purchase Agreement) and the other where it is "mainly for self-consumption". Under the new rateable values it is proposed that in some cases businesses that own their roof top solar panels and use most of the electricity themselves – which is likely to affect many public sector generators – could experience up to an eight fold increase in their business rates.
The current situation for solar rooftops could lead to two identical installations potentially paying very different rates depending on who owns the solar panels. For example, an organisation that generates and consumes electricity from their own rooftop solar panels will pay substantially higher rates when compared to an organisation that is consuming electricity generated by a third party through a Power Purchase Agreement. A similar scenario arose some years ago on Combined Heat and Power (CHP) and the government took legislative action to rectify the position. The Solar Trade Association (STA) is currently lobbying for secondary legislation to apply to similar exceptions as have been enacted for CHP.
The good news is that the STA has signed a Memorandum of Agreement for fair treatment of "mainly for export" generators to ensure the rateable values reflect falling installation and capital costs, and lower subsidy rates. This means that most solar systems exporting to the grid or via a Power Purchase Agreement will see a decrease in business rates.
Whilst business rates are devolved in Scotland, it is widely believed that the Scottish Valuation Office is likely to follow its counterpart south of the border.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
