Business Rates and Solar Panels: the England Exemption to 2035

In detail: what the 2022 regulations changed

Business rates are charged on the rateable value of a property (the “hereditament”). Under paragraph 2 of Schedule 6 to the Local Government Finance Act 1988, certain plant and machinery is assumed to be part of the property and so adds to its value. The Valuation for Rating (Plant and Machinery) (England) Regulations 2000 list four classes of such plant. Class 1 covers plant used for the generation, storage, transformation or transmission of power — historically the class that caught a solar array or a battery.

SI 2022/405 amended Class 1 with effect from 1 April 2022. It added two exceptions that apply “in relation to any day before 1st April 2035”: excepted renewables plant and machinery, meaning plant used or intended to be used for the generation, storage, transformation or transmission of power where the source or technology is mainly or exclusively biomass, biofuels, biogas, fuel cells, photovoltaics, water (including waves and tides), wind, solar power, geothermal or heat from air, water or the ground; and excepted EVCP plant and machinery, meaning plant used mainly or exclusively for the storage, transformation or transmission of power for an electric vehicle charging point. Excepted plant is not assumed to be part of the hereditament, so the Valuation Office Agency does not add it to the rateable value.

The practical effect for a business installing solar in England: the array, its inverters and a co-located battery do not raise the bill for the building they sit on, for the whole of the period to 31 March 2035. The building itself stays rateable exactly as before.

What is excluded and what is not

Two edge cases are worth a valuer's opinion rather than a guess: a purpose-built structure whose only function is to carry panels (a solar canopy over a car park, for example), and a site where the array is let to a third-party operator as a separate hereditament. Neither is settled by the words of the regulation alone.

Worked example: a 250kWp rooftop on a rated warehouse

Illustrative model, not a client engagement. A distribution warehouse in England has a rateable value of £180,000. The occupier installs a 250kWp rooftop array with a 200kWh battery at an installed cost of £240,000. Before April 2022 the Valuation Office could have treated the generation and storage plant as Class 1 plant and added an amount to the rateable value; since 1 April 2022 it cannot, because the plant is excepted renewables plant. The rateable value remains £180,000, the multiplier is applied to it exactly as before, and the only rating consequence of the installation is nil until at least 31 March 2035.

Set that against the tax side: the same £240,000 is special-rate plant for capital allowances, relieved through the Annual Investment Allowance and, above £1m, the 50% first-year allowance — see capital allowances on solar panels. The rates exemption and the tax relief stack; neither reduces the other.

How to check your valuation and what to do if plant has been added

• Find the property on the Valuation Office Agency's business-rates valuation service and open the detailed valuation. Plant and machinery additions are itemised.
• If an addition for solar, storage or EV charging plant carries a date on or after 1 April 2022, raise it through the Check, Challenge, Appeal process, citing the Valuation for Rating (Plant and Machinery) (England) (Amendment) Regulations 2022.
• Keep the commissioning certificate, the DNO connection letter and the installer's invoice: together they date the plant and prove what it is.
• Tenants normally pay the rates and landlords normally own the roof; agree in the lease who benefits from the exemption if the landlord funds the array — see the landlord and tenant split.
• Diarise 31 March 2035. Unless the exception is extended, plant installed today becomes rateable Class 1 plant again from 1 April 2035.

Wales, Scotland and Northern Ireland

SI 2022/405 amends the England regulations only. Wales, Scotland and Northern Ireland run separate non-domestic rating systems — the Welsh Government, the Scottish Assessors and Land & Property Services respectively — and each sets its own treatment of renewable plant. Check the relevant body before assuming the England position applies to a site outside England.

How the exemption fits with the other incentives

A commercial solar project in England now carries three separate reliefs that do not interact: the business-rates exception above; capital allowances on the spend; and export income under the Smart Export Guarantee or an export contract. VAT is the fourth line and works differently for businesses and charities — see VAT on commercial solar panels. The finance route decides who keeps each of them; we compare the routes on your numbers in a written finance comparison.

Claims table: every figure on this page and its source

Every number and proper noun above is listed here with where it comes from and the date it was checked. If a row is not here, the figure should not be on the page.