Rating items of plant and machinery (P&M) is a complex and misunderstood area that particularly affects the manufacturing sector.
The legal framework concerning plant and machinery has evolved over the years with case law and regulation originally driven by the idea that property usually provided by a landlord should be rated but tools of the trade should not. Modern business premises bear no relation to 19th century mills, for example but successive reviews of P&M regulations that limit rateable plant to specific named items have not kept up with the pace of change, so many anomalies have crept in.
Plant & Machinery was last reviewed in 1999
Government should proactively ensure businesses that invest in sustainability are not subject to higher taxes.
Keep an up to date definition of what is to be valued in order to support government targets for growth
Government to review the existing law and consider whether new legislation is required.
While the rental value of most buildings can be estimated fairly easily, the rental value of P&M is harder to ascertain and valuers usually fall back on converting an amortised capital value into a notional rent. For many industrial and logistics properties, P&M only amounts to a small fraction of rateable value (RV) although for some, it can make up the majority of the rates bill.
The committee identified that the rating of renewable energy (solar panels, wind turbines, etc) is at odds with the wider government policy of encouraging green investment and lowering CO² emissions. The rates liability for such items is therefore a recurring annual tax on a business’s investment.
It seems anomalous that a business will pay additional rates for putting solar panels on its roof for its own use but a solar farm’s panels feeding into the grid are not currently rated; or that air conditioning is rated in a restaurant but not necessarily in a frozen food shop.
The committee’s recommendation is for the government to consider whether a revision of current P&M legislation is required. If this is acted upon, we hope it would lead to the removal of anomalies and disincentives rather than a widening of the tax burden.