Update on Business Rates
Some of our members have been asking us about the effect that the crippling business rate hike that came into force in April 2017 and questioning what impact this has on the scheme. Despite already being in place for a month, the impacts are still poorly understood in the industry but we’ve been talking to those involved in setting and challenging the rate for clarity on a worst and best case scenario.
It is our current understanding that the business rate hike may not apply to SCEES and at worst, will have a small negative impact on the total community benefit fund over the lifetime of the project but would not affect investor repayments.
This increase has come about due a re-evaluation of the business rates undertaken by the Valuation Office Agency looking at how a variety of different assets are valued.
The rateable values of assets are reviewed every 5 to 7 years and it’s fair to say that the severity of the impact of the new rates came as a surprise to the industry as a whole. Not until the budget in early 2017 was there some clarity on what the new rates would be and how they would be applied, even though there is still some uncertainty now.
At the time of launching the Share Offer, owners of microgeneration systems - those under <50kWp (or about 200 panels) – were exempt from paying business rates and had been since 2010.
Under the re-evaluation the microgeneration exemption has been removed and the methodology for calculating the rateable value of solar PV assets has been re-defined. Originally the rateable value was due to increase by about 600-800% and was to be applied to all projects. However the Solar Trade Association and the Valuation Office Agency have a Memorandum of Agreement which applies to those who ‘mainly export’ their power such as SCEES.
Under this agreement the rateable value of rooftop solar PV (under 50kWp) installed after April 2015 is £7,080/mw. Therefore the rateable value of SCEES assets is £2,548.80 or a total payment figure of approximately £1,220 once the business rate multiplier has been accounted for.
Given that SCEES is likely to qualify for business rate relief under the exemptions for small businesses we are looking to clarify with the local council as to whether we are due to pay business rates on our assets at all.
We will update members further once we have more detail, but even under the worst case scenario this will have no impact on the predicted 6% interest paid to investors but will slightly reduce the cumulative community benefit fund figure over 20 years.