Our Thoughts
Mon, 04/04/2022 - 12:00
· 2 min read

‘Green’ Plant and Machinery Derated

In his recent Spring Statement, Rishi Sunak identified poor levels of private sector investment and confirmed that “creating conditions for higher growth” as being one of his principles to cutting taxes.

Alas, with little fiscal room for manoeuvre, and in full view of the energy crisis and green agenda, it was a cheap and easy pledge for him to “de-rate” green plant. As of 1 April 2022 regulations came into force removing from rating “excepted renewables plant and machinery” (such as biomass, wind, solar and geothermal) that generates, stores or transforms power to be used exclusively on the premises. These measures will primarily be of benefit to the manufacturing and retail sectors where power is generated on site.

Rating Plant & Machinery is difficult with valuers often having to fall back on converting an amortised capital value into a notional rent, which usually accounts for a small fraction of a property’s overall rateable value that is often lost in the rounding of the total valuation. For a lot of businesses these changes will make little difference to their rate liability, but they will remove the anomaly between the rating of generation for the occupier’s own use from that for sale to the grid and the disincentive to install solar panels. 

While this change is welcomed a thorough review of the rating of plant and machinery to bring it into line with current market practice is long overdue. Where there is a charge the rate liability is akin to an annual recurring tax on investment.

We reported previously that an earlier parliamentary inquiry into business rates observed that businesses investing in sustainability should not be subject to higher taxes. The new regulations accord with this observation, although it is still just “tinkering around the edges” of the wider reform of P&M that is required.

‘Green’ Plant and Machinery Derated