Inconsistent tax policy for commercial solar owners in the UK

Just when you think there might be some good news for the U.K.’s solar industry, you get slapped back into reality with another bitter pill to swallow from a government that seems to have a vendetta against the clean energy technology. This time it came in the form of business tax rates, which showed logical improvements for solar owners that export the energy, but nonsensical tax hikes for those that use the energy themselves, which would result in tax bills rising from GBP 400 (USD 519) to GBP 2,700 (USD 3,500) on a 100 kW system.

The draft rates were released by the VOA today, and split business owners of solar panels into two groups; the ones that mainly export the energy they generate, and those that mainly use the energy themselves. The U.K.’s Solar Trade Association (STA) had worked with the VOA in trying to secure fair rates of tax for solar owners, and was partially successful.

In fact, STA had managed to highlight to VOA that falling costs and lower rates of subsidies had affected the valuation of solar systems, which has resulted in the solar owners exporting to the grid or under a PPA being offered a decrease in the business rates by the VOA. However, for an as yet to be discovered reason, the VOA has hiked up the rates by six to eight times for businesses that use the solar energy they generate themselves.

“The good news for ‘export’ solar is that, in most cases, the rateable value will fall from 2017, some by as much as half,” commented STA CEO Paul Barwell. “Rates should reflect the true value of the solar asset, as well as the income received. As both of these have fallen dramatically over the last five years for solar power, the rateable value has also fallen: logic has prevailed. We now need ministers to act to ensure similarly fair treatment for those supplying themselves with their own rooftop solar.”

Worry over the tax hikes

STA has rightfully said that there is “dismay” in the solar industry and across the green economy after hearing about the proposed tax hike. It was an unexpected move from the VOA, which would see a six to eight-fold increase in annual tax paid on the solar systems. To give an example, for a 100 kW system, annual tax would go from GBP 400 (USD 519) to GBP 2,700 (USD 3,500).

The STA points out that this could lead to two identical installations potentially paying completely different rates just because of where the energy is going. Also pointing out that this is set to further damage the commercial rooftop industry, as it could see a reduction in their return on investment of approximately 2.5%.

“Hiking business rates for firms which produce their own energy from solar panels is a short-sighted move,” said Green MP Caroline Lucas. “Solar is a cheap and efficient way to produce energy, yet this government is side-lining this hugely popular technology and now risks allowing it to be undermined. This tax hike will punish those businesses which are acting on climate change, and it should be rethought immediately.”