UK tax on rooftop PV could go up nearly eight times next year

Due to a re-evaluation of business rates, the tax rates in the UK on commercial rooftop solar could increase by six to eight times as of April 2017, the Solar Trade Association reported.

This would greatly increase the running costs of rooftop solar installations and affect existing and new solar projects. As Paul Barwell, CEO of the Solar Trade Association, commented: “In some cases, it would actually send installations into negative returns: you would be spending more on the system in tax and maintenance than you would be getting back from the sale of the power and the Feed-in Tariff support. We therefore need Ministers to step in as soon as possible.”

The change is coming due to a wider revaluation of commercial properties. For this, the HM Revenue & Customs’ Valuation Office Agency calculates the “rateable value” of businesses including assets and the income they generate, which in turn is used to calculate business tax rates. This is unfavourable for photovoltaics since the capital expenditures (“acquisition costs”) of PV systems on which those calculations are based were rather high but have decreased dramatically together with the subsidies over the past few years.

The issue is that the new “rateable values” bear little relation to the revenue generated by the PV systems but are instead based on fixed assumptions about capital costs of installations. Part of the reason for this is the way business rates legislation is worded.

The rate increase will not affect domestic PV systems. According to STA, it will only affect businesses that have a PV plant on their roof, are the owners of the system and installed it with the intention of using most of the electricity themselves. This tax rise could also affect public authorities, schools and community buildings with rooftop PV systems, although there are exemptions, for example for some agricultural buildings and some small business exemptions.

The significant increase in business rates for commercial solar PV will come into effect as of 1 April 2017 and could discourage new investments into photovoltaic systems – unless the UK Government intervenes beforehand.

Paul Barwell continued: “This is a complex issue. We believe the methodology shouldn’t be applied to solar rooftops in this way. We now plan to work with the three different government departments – Treasury, Communities and Local Government and Energy – to discuss our proposals to exempt self-owned rooftop solar from business rates altogether. Ministers must act now, otherwise this tax rise will all but eliminate the incentive for businesses to invest in solar.”

Tanja Peschel / Solar Trade Association

http://www.sunwindenergy.com/photovoltaics/uk-tax-rooftop-pv-go-nearly-eight-times-next-year