JLL says current business rate rules inhibit the introduction of sustainable energy sources in commercial buildings – I AM NIKOM-Shutterstock
Business rates regulations must be changed to encourage sustainable energy in buildings and contribute to the move towards zero carbon, according to JLL.
In its report, Business Rates and Sustainability, the real estate company claims that the introduction of sustainable energy sources in commercial buildings is inhibited by current business rate regulations. It is advocating a change to the rating multiplier so that business rates would be linked to the energy efficiency of a property. This would encourage improvements and investment into alternative, more sustainable, sources of heat and power, it says.
Business rates yield around £30 billion a year across the UK in public sector revenue, and JLL sees it as an obvious target for changes. It argues that relatively simple changes to the plant and machinery regulations could transform the commercial viability of solar and wind power for buildings.
Currently, business rates are based on a building’s annual rental value – the rateable value –
multiplied by the rating multiplier, currently 0.512 in England or 51.2p in the pound.
JLL argues that this level of rating multiplier acts as a dampener on any sort of development, including sustainability improvements.
In its report, it recommends that the rating multiplier should be varied by the energy performance certificate (EPC) ratings for each property, on a sliding scale, and that this would incentive environmental improvements.
It suggests:
- EPC Rating Change in rating multiplier/p in the £
- EPC ‘A’ -0.04 / -4p
- EPC ‘B’ -0.02/-2p
- EPC 'C' – / 0 (no change)
- EPC ‘D’ 0.02/+2p
- EPC 'E' 0.04 / +4p
- EPC ‘F’ 0.06/+6p
- EPC 'G' 0.08 / +8p
Changes to the plant and machinery regulations would remove any business rates penalty for using renewable energy sources, or exempt buildings using sustainable energy, and pipes or cables transferring it, from parts of the rules, JLL recommends.
Rateable value changes linked to new plant and machinery in classes 1 and 2 should only be taken into account at the next rating revaluation following the commissioning of the plant concerned.
This would simplify the process of bringing such a plant into the rating system and give ratepayers greater confidence in their financial budgeting, it adds.
JLL’s report says: “The changes should be legislated for as soon as possible but brought into effect in 3-5 years’ time, to allow the property market to adjust and to encourage immediate investment in improving the UK building stock.”
It adds that as the built environment contributed around 40 per cent of the UK’s total carbon footprint, any improvement to the energy efficiency of UK building stock was important to achieve environmental goals.
Tim Beattie, head of UK rating at JLL, said that there had never been a more pressing time and greater opportunity to align the tax with the UK’s climate objectives.
“This can encourage fundamental changes to be made to the energy sources in commercial buildings, and the way in which they are used, and ensure that assets are performing efficiently and sustainably, as quickly as possible,” he said.
