Big brands call on UK Government to ‘stop the solar tax hike’

More than 160 leading green businesses including Sainsbury's, Ikea and Kingfisher have today (5 December) called upon Chancellor Philip Hammond to scrap scheduled tax increases on solar PV.

A letter penned by the Solar Trade Association (STA) and signed by a diverse group of businesses, NGOs, politicians and academics expresses concern for the changes to business rates paid on ‘self-consumed’ solar, due to be enforced in April 2017.

The letter, addressed to Hammond, calls for the reconsideration of these “uneconomic” penalties that the signatories claim could potentially hinder other small business contributions to renewable energy and climate targets.

STA chief executive Paul Barwell said: “The sheer diversity of groups willing to sign this letter demonstrates the breadth of feeling on this issue. Now that the UK has signed the Paris Agreement, it goes without saying that the Government should support organisations seeking to reduce their carbon footprints, not penalise them. It is essential that solar energy is treated sensibly within the tax system.”

Upcoming revaluation

The taxes on self-consumed solar energy will increase by six to eight times current levels if the change does go ahead in April. With the tax hike affecting those consuming self-generated solar power, the group most likely affected are small businesses with on-site solar solutions. Those groups that consume solar power from a seperate supplier will not be affected by the tax hike, nor will public sector organisations.

In April 2010, a ‘set rateable value’ was applied as the standard business rate for solar. The upcoming revaluation by the Valuation Office Agency (VOA) will increase that set rateable value from £8/kW across the board to between £48/kW and £62/kW.

Based on a 100kW rooftop solar system, the total annual bill of using the system for generation and consumption would increase from £397.60 to £2,733.50 per year.

Chart: Rate revaluation levels for self-owned commercial rooftops

A number of recent policy changes have already seen rooftop solar deployment fall by 80% in the UK. Former UK Energy Secretary Amber Rudd committed to proposed feed-in-tariff (FiT) cuts in December last year, with small commercial projects of 10-50kW in size seeing the subsidy rates reduced from 11.30p/kWh to 4.59p/kWh.

Green groups claim this business rates rise will likely further jeopardise the industry. Solar has been continuously disadvantaged in the tax regime whilst other renewable solutions such as combined heat and power (CHP) solutions have been exempt from tax rates since 2001. Conversly, fossil fuel extraction receives tax breaks, including 100% capital allowances for oil and gas production in the first year.

National chairman for the Federation of Small Businesses Mike Cherry said: “The inclusion of solar panels in the business rates calculation could leave small businesses with a rooftop solar installation facing a huge eight-fold tax hike. For many small firms who may have already been impacted by recent changes to low carbon subsidies, this is an extra financial burden that they will struggle to cope with.”

Alex Baldwin

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