Valuations Office acts to limit business rates for companies exporting sizeable amount of solar power to the grid, but those using power on site could yet see eight-fold tax increase
The solar industry appears to have won a partial victory in its push to ensure companies, schools and hospitals that have installed solar arrays are not hit with a huge tax hike next year, although fears remain many organisations could still see business rates for their solar installations increase six to eight fold.
The Valuations Office Agency (VOA) is today expected to confirm that organisations that 'mainly export' their solar power will see a decrease in business rates to reflect the falling cost of solar technologies and recent cuts to subsidies.
The cuts will apply to organisations that export over 50 per cent of the power they generate, either by supplying power to the grid or by selling it to the organisation hosting the array through a Power Purchase Agreement (PPA).
The approach follows the signing of a Memorandum of Agreement between the VOA and the Solar Trade Association (STA), which has been leading the campaign to ensure companies that have installed solar arrays are not hit by sharp increases in business rates next year.
"The good news for 'export' solar is that, in most cases, the rateable value will fall from 2017, some by as much as half," said Paul Barwell, chief executive of the STA in a statement. "Rates should reflect the true value of the solar asset, as well as the income received. As both of these have fallen dramatically over the last five years for solar power, the rateable value has also fallen: logic has prevailed."
However, the trade body remains concerned organisations which use the bulk of the solar power they generate directly on site are still on track to face a six to eight fold increase in the business rates they have previously paid for solar, despite consuming power onsite being a highly efficient option.
Moreover, industry insiders are concerned the promise of cuts in business rates for solar arrays that have a PPA in place means two identical arrays would be taxed differently based on the legal ownership structure for the solar installation.
The discrepancy raises the prospect of companies or schools setting up a Special Purpose Vehicle (SPV) to take ownership of a solar array and sell the power back to themselves through a PPA in order to take advantage of the lower business rates.
Business and Energy Minister Jesse Norman said recently the government would "look at it closely" at the situation when the VOA comes forward with its plans for valuing solar arrays.
However, the solar industry and a number of MPs are now calling on ministers to act swiftly to ensure organisations that have installed solar technologies are not hit by punitive taxes that would deal a further blow to a solar industry that has already contracted sharply in the wake of recent subsidy cuts.
"One of the huge advantages of solar is that it has low operational costs as the sun is a freely available energy source," said Barwell. "The estimated £1,000 a year operational and maintenance cost for a typical 100kW system will now be dwarfed by the £2,700 annual rates bill. Legislation needs to correct this anomaly so that all solar installations are treated fairly."
Green MP Caroline Lucas, who has written to Ministers and who is tabling a cross-party Early Day Motion (EDM) as soon as Parliament returns to address the tax increase, warned that "hiking business rates for firms which produce their own energy from solar panels is a short-sighted move".
"Solar is a cheap and efficient way to produce energy, yet this government is side-lining this hugely popular technology and now risks allowing it to be undermined," she said. "This tax hike will punish those businesses which are acting on climate change, and it should be rethought immediately."
Her concerns were echoed by Conservative MP Zac Goldsmith who warned the proposed business rate increases would "harm businesses and industries seeking to limit their carbon emissions by installing self-supplying solar systems".
"Given our climate commitments under the Paris Agreement, it makes no sense to penalise businesses for lowering their emissions," he added. "I am urging the Treasury to intervene to prevent damage to an important sector, and to ensure that taxation policies work in favour of positive climate action"
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