Small businesses who have rooftop solar installations could see their business rate taxes increase by eight times.
Discussions between HM Revenue and Customs’ Valuation Office Agency (VOA), and the Solar Trade Association (STA), have revealed that the wider review of business rates is set to dramatically increase the tax for anyone planning to install rooftop solar, but also for those who already have it installed.
This increase would mean a company currently paying around £320 for a 100kW system could see its tax rise to almost £2,500. This would severely damage the economic viability of rooftop solar at a time where low carbon, renewable energy and technology urgently needs increasing. STA have stated that the rateable value is only being based on capital costs of installation as of 1st April 2015, even though solar PV costs and subsidies have dropped significantly over the last five years. They estimate this is due to increase from £8kWp to anywhere between £48.40-61.60kWp.
Possible negative returns for solar
Chief executive of the STA, Paul Barwell, said: “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 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 VOA review takes place every 5-7 years, and applies a specific methodology to calculating the rateable value, which is multiplied by a factor of 0.4 to gain the amount the company should pay each year.
These rates changes will only apply to self-owned installations, and not solar farms or third party owned systems, making this an enormous blow for small businesses who are doing there bit for the future of our planet.
This is another damaging hit for solar, after the cuts to the feed-in-tariff and changes to the Renewables Obligation support. This tax hike could result in firms pulling out of future solar investment, and even the dismantling of existing systems to reduce businesses tax rates. Chris White, head of rooftop solar at Dulas, believes if these changes do take place, potentially as soon as April 2017, it would be the end of the rooftop solar industry in the UK.