Sustainability

Do you have solar panels? Check your business rates

Philip Eagle, tax director at accountants and Hub partner, Hallidays, outlines how companies with solar panels could be impacted by recent changes to business rates – and what the solutions could be.

Solar panels. In our climate. Really? We know what it sounds like, but what you need to know is it’s about daylight not sunlight. Even on gloomy days, they catch the sun's energy and convert it into electricity.

For users of rooftop solar panels, there are winners and losers with the revised revaluation of commercial properties which apply from 1st April 2017.

Every five to seven years the Valuation Office Agency (VOA) revises business rates (the tax charged on non-domestic properties and business assets) to reflect how values have changed since the last revaluation.

The last revaluation was in 2010 based on values pegged to April 2008, and this recent revaluation is based on values in 2015. 

The new methodology adopted by the VOA means that the owners of solar panels are split into two classes:

  • those who mainly export their power
  • those who use the majority of power on the site they occupy

Winners and losers

Okay it’s not about winning or losing, but how much money you could save.

The “winners” are those that mainly export their power to the grid or via a power purchase agreement. Most are likely to see a reduction in their business rates, which reflects the falling costs and lower rates of subsidy. 

The “losers” could be those who use the majority of power they generate. Under the new legislation, their solar cells and panels will be considered rateable as plant and machinery. The value gained from installing solar is treated as an addition to the value of the whole property, which means that the rateable value increases and so do the business rates payable.

We’d prefer to say it was a “win-win” situation but, to reinforce the point, it’s really not…

Solutions

One possible solution is to operate the solar installation through a special purpose vehicle (SPV), possibly a separate company, or even a limited liability partnership. In this way the SPV is treated as a separate legal entity providing the power generated to a third party. Such a change requires careful consideration and is not a solution in all cases but warrants consideration where the rate increase is significant.

For support

Please contact us on 0161 476 8276 or email hello@hallidays.co.uk to discuss how these changes will affect your business and receive expert advice.

The Hub’s energy efficiency experts are also on hand to help you take advantage of renewable energy and cut your energy bills - discover more.

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Philip Eagle

Philip Eagle, Tax Director, Hallidays