The Scottish government has been recommended to allow companies who invest in solar a year-long grace period before higher business rates come into effect.
The proposal has been made as part of the Barclay Review, led by former RBS Scotland chairman Ken Barclay, which was established last year to report on non-domestic business rates in the country, specifically on potential areas of unfairness.
The Barclay Review group this morning published its findings and a series of proposals, among which is a 12 month-long ‘delay period’ before new rates come into force in order to stimulate economic growth.
The report cites evidence from a “large number of ratepayers” from both public and private sectors who claimed that the immediate increase in rateable values enforced when any investments are made to improve properties or plant and machinery had acted as a “disincentive and barrier to investment”.
In particular the report claimed that the status quo penalises ratepayers who make environmental improvements, including rooftop solar PV, allowing them no time to recoup any of the capital investment before higher rates apply.
After proposing the changes this morning, Barclay added: “Many wished to remove barriers to investment and our Business Growth Accelerator would do just that. By removing the burden of rates for 13 months for anyone who improves their property, we hope to stimulate growth and bring forward investment that may have otherwise been marginal.”
The review concluded that the above changes could be made in time for the 2018/19 financial year and would cost around £45 million to enact.
And commercial rooftop solar in Scotland could also be buoyed by proposed reforms to the periods between rate revaluations, meaning that the rate would be revalued every three years, and a separate review to regulations affecting plant and machinery, the category which rooftop solar falls under.
That review, which is to take a particular focus on renewables, must be started imminently to feed into the next rate review pencilled in for 2022, the report said.
However Leonie Greene, head of external affairs at the Solar Trade Association, stressed the need for greater urgency.
“We welcome the new review into Plant & Machinery, with a particular focus on renewables, but the time table for concluding this review is too slow. Solar is booming internationally now. The business rate treatment of rooftop solar is one of the key factors working against this market in Scotland since other EU countries do not levy these kinds of taxes. Business rates is one area where Scotland does have powers to act and they shouldn’t hesitate to do so in order to provide a level playing field for the Scottish solar industry and for businesses that want to invest to reduce their emissions," she said.
One of the key principles which caused the April 2017 rate change to affect rooftop solar so harshly was the fact that the rates had not been changed since commercial PV had been ‘mainstream’. The Valuations Office Agency, which conducts the reviews, only does so every five or seven years.
Scottish Renewables welcomed the proposals, adding that business rates are a “key part” of the business environment when it comes to renewables.
“Today’s report is to be welcomed in both its understanding of the evidence submitted by Scottish Renewables, and our members, and in its call for action to address existing issues.
"We would now encourage Scottish Government to ensure these changes become part of Scotland’s rating system as quickly as possible to deliver benefit to businesses in the renewables sector and across Scotland’s economy,” Niall Stuart, chief executive at Scottish Renewables, said.
The proposals are now before Scottish ministers for review and will be presided over in due course.