Business rates for rooftop commercial solar power panels will rocket by up to eight times current rates across the UK in April 2017, unless the Government intervenes between now and then.
Public authorities, schools and community buildings that have solar on their roofs are also at risk of being affected by this tax rise.
The Solar Trade Association has been in talks with the Valuation Office Agency and its equivalent bodies that administer business rates in devolved administrations in Scotland and N. Ireland to minimise or remove the intended tax increase.
However the problem lies with the way business rates legislation is worded and therefore requires attention from government.
Paul Barwell, Chief Executive, Solar Trade Association, warned: “This is a huge increase in the running costs of a rooftop solar installation that will affect both existing and new projects.
“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 Treasury Ministers to step in as soon as possible. The system needs to recognise that solar is a unique technology with both costs and revenues having come down over the last five years. This has created a complete mis-fit with the business rates system that needs to be fixed, or else we will face a prohibitive tax hike in this sector.”
The change is coming due to a wider re-evaluation of business rates that takes place every five to seven years, where the Valuation Office Agency looks at how assets are valued, the income they generate and how costs have evolved over that period.
However, solar PV presents a particular challenge as a cap-ex heavy technology where both costs and subsidies have dropped dramatically over the past five years.
The issue is that the ‘rateable values’ that will come into force for rooftop solar as of next year bear little relation to the revenue generated by the installations but are instead based on fixed assumptions about capital costs of installation.