Business rates killing community hydro and some!

We don’t do community hydro for personal gain. But it’s taxed as through it is.

Its been a while coming this blog but i have been living the dream of the impact of the business rates revaluation on community hydro. A community hydro we have been working with is in danger of being taxed to death. More on that later

What are business rates? They are a sort of tax (currently 49%) on the notional rent value of a thing such as land, chattels, plant and machinery, which is set by the Valuation office (Business rates valuation) They are covered in something called the Plant and Machinery order  which in essence started life in 1925 as an order but can trace its lineage back to the doomsday book as this defined ‘things which could be taxed’ (the ‘hereditament’ as its called. Jargon is us in this area)

A hydro because a lot of the stuff is built into the ground has been un-fairly impacted way over what other renewables have been impacted. For example I know of a wind turbine of 4700kwp in power which is paying the same business rates as a 270kw hydro (around £25k pa). the wind turbine makes 13 million kwh per year and the hydro makes 950 thousand KWh pa. It’s because of the way the plant and machinery order looks at the ‘thing’ and the assumption of landlord vs tenant investment. Quite often a tenant funds the whole thing but the order assumes that a lot of the underground stuff is the Landlord and so can raise rates on it

Doing good for future generations and for our communities

What does this mean in terms of impact? The Bethesda community hydro (Ynni Ogwen) in N. Wales switched on a few weeks ago after 3 years plus of hard graft. Halving of its FIT just before registration and thousands of hours of volunteer time, complete local buy-in with the shares and all to provide local benefit through the surplus. The Business Rates valuation last week from the valuation office all of this benefit (surplus), yes all of it will now go to the Government. The initial business model had been based on the previous business rates regime and we had assumed a 10% increase as happened last valuation but it came in at a tad over 300% thus wiping out the reason why the community fully backed, funded and supported the hydro. In Scotland the Government gives 100% rates relief for community energy and England have capped the increase for community energy to no more than an extra £50 per month. The valuation in Bethesda is too high for small business rates relief and it can’t apply for transitional relief because it is  a new hydro and it’s not transitioning from anything as it did not pay before, as it was being built. Perfect storm as you might say. This is affecting many hydros private and community

Governments both UK and Wales are being lobbied. We are also applying to the local authority to use its discretionary powers as this is a social enterprise with no one profiting and all of the surplus going to community sustainable development (called philanthropic rates relief). We will have sufficient turnover to look after the local share-holders but with nothing left over. This is a social business which can not grow its way out of this increase as the FIT and water abstraction regime are fixed (unlike many other businesses) . This to all of us involved feels like a tax on volunteering and community development with a bit of climate change tax thrown in (but on the low-carbon side) where as if we had a Fracking gas drill rig then… I best stop there!

Fixing it will take an amendment to the plant machinery order which may not be simple given that everything is Brexit in Government and so we are hoping Welsh Gov will come in to help to lobby UK Gov but also to come up with a Wales solution. But at the moment finger nails are down to the bone and we have a lot more lobbying and asking to do

HEEEEEELP!

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2 Responses to Business rates killing community hydro and some!

  1. Thanks for sharing Keith. This is a ridiculous situation. England and Scotland have found short term solutions to this. Welsh Govt (Mark Drakeford?) need to do so too. And then figure out a longer term fix. As you say, it’s illogical that our 4700kw wind farm is paying the same business rates as a 230kw hydro. I’ll email Jeremy Miles and Huw Irranca Davies shortly who are our local AMs and very supportive of co-ops. Will copy you in. Dan, Awel Co-op

    • Keith Jones says:

      Thanks Dan. There are lots and lots of meetings on this. Everyone has agreed its a problem at a UK, Wales and Local Authority level but no solutions or even temporary stay of execution at the moment. But we keep on keeping on

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