Government brings in business rates relief for onsite renewables and low-carbon heat networks
Amidst a backdrop of war in Ukraine, rising energy prices and a squeeze on the cost of living, last week’s Spring Statement came with quite a to do list.
The Chancellor pledged to “support the British people with the rising cost of energy”, but those hoping for transformative action on energy efficiency were disappointed; green announcements were few and far between.
For households, there will be a temporary scrapping of VAT for green retrofit materials such as solar panels, insulation and heat pumps.
For businesses, there will be near-immediate rates relief for onsite renewables and storage equipment, as well as 100% relief for low-carbon heat networks. We’ve got more details here.
Business rates green relief
At Autumn Budget 2021 the government pledged to introduce business rate exemptions for plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill, to support the decarbonisation of non-domestic buildings.
It had planned to introduce these measures in April 2023, but in last week’s Spring Statement the Chancellor announced they will now take effect from April 2022. Enhanced Capital Allowances for energy efficient equipment ended in April 2020, so this new measure will be welcome for businesses hoping for extra support to decarbonise.
Local authorities will be compensated for the loss of income because of these measures and will receive new burdens funding for any administrative and IT costs.
Business rates are England only and the devolved administrations will receive Barnett consequential funding in the usual way.
What plant and machinery are eligible for business rates relief?
The final details have not yet been confirmed, but relief is likely to apply to plant and machinery used in onsite renewable energy generation and electricity storage (such as rooftop solar panels, wind turbines, and battery storage) plus electricity storage from any source where it is being used for electric vehicle charging points.
These will be exempt from business rates from April 2022 until 2035.
Heat network relief
100% rate relief will be granted for heat networks which are separately assessed and so have their own rates bill. This will take effect from April 2022 and will last until March 2035.
These will typically be larger networks run as a separate business – that may be separately assessed and have their own rates bill.
In a consultation document which has recently closed the government is proposing to target the relief according to the following criteria:
- The property should be wholly or mainly used as a heat network (broadly speaking this is where the heat network is in a separate occupation to the buildings or customers it serves).
- Only facilities which provide more thermal energy than electricity should qualify. This will ensure that facilities which by their nature are electricity power stations rather than heat networks do not qualify.
- The thermal energy should be generated from a low carbon source.
You can read the Spring Statement in full on the government website.