Rating Manual section 5: certificates issued by the VOA

Part 2: other certificates

The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.

Renewable energy certificates

1. Renewable energy certificates (applicable only in England)

1.1 The Non-Domestic Rating (Renewable Energy Projects) Regulations 2013 SI No. 108 permits a BA to disregard rate income from certain renewable energy projects in calculating the amount it needs to send to central government; it is, thereby, able to retain these sums for its own and precepting authorities’ use. They therefore retain all of the rates income from certain renewable energy projects.

1.2 The classes of hereditaments that qualify under the scheme are:

Class A: New renewable power stations entering a list on or after 1/4/13

(all the rates will be retained locally),

Class B: Existing renewable power stations

(growth in rates post 31/3/13 will be retained in full locally)

Class C: Renewable power stations created from class B hereditaments

(again growth in rates post 31/3/13 will be retained in full locally)

Class D: Energy from waste plants

(the rates on any renewable energy plants which have been in use since on or after 1/4/13 will be retained in full locally)

Class E: Other hereditaments used (at least in part), for the purpose of generating electricity on or after 1/4/13 (the rates on new renewable energy plant parts will be retained in full locally)

Class F: Cables and sub-stations associated with off shore generating plants entering the list on or after 1/4/13 (all the rates will be retained locally).

1.3 Following consultation in the summer of 2011, the government decided that local authorities should be responsible for identifying qualifying projects. Therefore, VOs have no formal responsibility for identifying the projects falling within these classes. Nevertheless, the definitions used in the classes are based upon previous and existing rating regulations and it is recognised that VOs have considerable expertise in this area. Therefore, it is expected that the VOA will work with local authorities in helping to identify qualifying projects.

1.4 In addition to the usual responsibilities of a VO to value and enter hereditaments in the relevant rating list, there is now an additional responsibility to issue certificates for classes D and E when requested by the BA.

1.5 Class D: Energy from waste plants

1.5.1 These are hereditaments comprising land, plant or buildings where the sole or primary function is either:

(i) generating electricity where the primary source of power for that purpose is the burning of waste; or

(ii) burning waste, where the hereditament is also used for generating electricity and the primary source of power for that purpose is the burning of waste.

1.5.2 The certification required is to certify the proportion of RV which appears to the VO to be attributable to any part of the hereditament which is:

a) used or is intended to be used wholly or mainly in connection with the generation of electricity; and

b) has been in such use or intended for such use since on or after 1st April 2013.

1.5.3 Whilst the wording ‘since on or after 1st April 2013’ may appear a little ambiguous the wording is intended to mean certification will only apply to electricity generation use which started on or after 1st April 2013.

1.6 Class E: Other hereditaments used for the purpose of generating electricity

1.6.1 This class concerns hereditaments which have some plant and machinery (P&M) used for generating electricity from renewable sources but are neither primarily renewable power stations nor energy from waste plants i.e. do not fall in classes A-D. They comprise any hereditament that:

(a) includes separately identifiable rateable P&M used or available for use for the purpose of generating electricity and

(b) the rateable P&M uses as its primary source of energy –

i. wind;

ii. water;

iii. solar;

iv. the burning of biomass;

v. the burning of gas from biomass; or

vi. the burning of gas from a landfill site; and

(c) the rateable P&M started to use one of the above sources of energy to generate electricity on or after 1st April 2013.

1.6.2 The plant needs to be both separately identifiable and rateable.

1.6.3 The regulation permits P&M not actually used but available to be used to be certified and this will apply, for example, to any stand by plant which satisfies the definition of Class E or such plant in vacant hereditaments.

1.6.4 The certification required is to certify the proportion of the hereditament’s RV which appears to the VO to be the separately identifiable impact on the RV attributable to the Class E plant and machinery and to any associated land and buildings.

1.7 Plant and machinery

1.7.1 The P&M therefore needs to be both separately identifiable and to have a separately identifiable impact on the rateable value.

1.7.2 The Government’s summer 2012 consultation on rates retention recognised that many small scale or integrated renewable technologies had no impact on rateable values and that the renewable retention scheme was, in this respect, focussed on larger separately identifiable projects on other hereditaments. It said:

‘5.8 Renewable technologies spread much wider than renewable power stations. In many cases, small scale renewable technologies installed on conventional properties will not result in any increase in their business rates bill. This is because the value of the micro generation is generally de-minimis in comparison to the rateable value of the property. However, in some cases, a large installation of renewable technology on a property used for other purposes could increase the rateable value and, therefore, rates bill on that property.

5.9 The Government proposes that where a new renewable technology has had a separately identifiable impact on the rateable value of a property then the Valuation Officer should certify the proportion of the total rateable value which is attributable to the renewable technology and any associated land and buildings.’ (Local Government Resource Review: Proposals for Business Rates Retention. Technical paper 8: Renewable energy.)

The resulting wording of the regulations, again subject to consultation, followed from this.

1.7.3 Where P&M is separately valued as part of the VO’s valuation calculations it will have a separately identifiable impact on the rateable value: where the particular P&M is treated as reflected or included in the overall value per M2 of the valuation it will not have a separately identifiable impact.

1.7.4 A wind turbine capable of generating 100KW/hr installed at a factory on or after 1 April 2013 may require an addition to the rateable value to reflect it being an improvement to the existing hereditament. The P&M is rateable and will be both separately identifiable and have a separately identifiable impact on the rateable value. In contrast an office building erected with special exterior panels which comprise the exterior skin of the building as well as also being capable of generating 100KW/hr but where the building is simply valued on a £/M2 basis by comparison with other Grade A office buildings in the locality will neither have separately identifiable P&M nor P&M having a separately identifiable impact on the rateable value.

1.7.5 Equally where a small micro-generation plant is added to a hereditament but it is found, when the notional RV is added to the existing arithmetical total of rateable value, the additional amount is not sufficient to justify increasing the actual rateable value due to the effect of ‘rounding’ then there will not be a separately identifiable impact on the rateable value because the RV has not changed. This does not mean that with a new hereditament the micro-generation can be ignored if its value is less than the rounding of the whole. The point only applies where the RV is not altered as a result of the addition of the plant.

1.7.6 In practice, for non-separately assessed power generators very little P&M installed to generate electricity on or after 1 April 2013 will immediately come within Class E. This is as a result of Regulation (2A) of The Valuation for Rating (Plant and Machinery) (England) Regulations 2000 SI No 540, as amended, which applies to any plant and machinery installed on or after 1 October 2008 which has “microgeneration capacity”. This requires any value attributable to the microgeneration capacity (50 KW) of a hereditament’s P&M to be ignored until the next revaluation (or when the capacity ceases if earlier). Rateability will only apply to P&M which exceed the limits of microgeneration. As this P&M is not included in the rateable value of the hereditament it cannot be apportioned out.

1.7.7 The effect of Regulation (2A) is covered in more detail in RM6:5 PN8.

1.7.8 The general treatment of renewable energy installations for local taxation purposes is covered in RM6:5 PN10 Renewable Energy Installations.

1.8 Associated land and buildings

1.8.1 For some generating plant there will be associated land and buildings. This might be the land upon which a free standing wind turbine stands forming part of the hereditament or the sub-switching station building associated with the turbine.

1.8.2 What is and is not ‘associated’ will depend on the facts of the case but the wording also requires the ‘associated land and buildings’ to have a ‘separately identifiable impact on the rateable value’ and so it is not a simple matter of apportioning the value of a building which has other uses. Either there needs to be a separate addition to the value of the land or buildings for the use in association with the P&M or the land and buildings need to be solely so used for there to be a value to certify.

1.8.3 In most cases the rateable value placed on the electricity generating equipment, (solar photo voltaic or wind turbine), will be calculated using a receipts and expenditure method. The value attributable to any associated land and buildings will not therefore have a ‘separately identifiable impact’.

1.9 Certificates

1.9.1 The VO is required to certify the values as soon as reasonably practicable after receiving the request.

1.9.2 Whilst the need to certify follows a request, VOs should be conscious of this and ensure potentially certifiable buildings and P&M are identified during inspection.

1.9.3 Class D Energy from Waste plants will need certification if they are not wholly used for generating electricity. VOs should identify these (in association with the NSU Mineral Valuer) and be ready to respond to requests from BAs following 1 April 2013.

1.9.4 The certificate has effect from the date the circumstances requiring the certificate first arose until it is replaced or superseded by a later certificate due to changed circumstances.

1.9.5 Unlike a transitional certificate, which relates to a set date, a renewable energy certificate has effect from the date the circumstances requiring the certificate first arose until it is replaced or superseded by a later certificate due to changed circumstances

1.9.6 The actual certificate must be retained by the VO and a copy sent to the BA. There is neither requirement nor need for a copy to be sent to the occupier or ratepayer as the certification has no effect on liability for rates.

1.10 No applicable renewable energy to certify

1.10.1 If a request for a renewable energy certificate has been received and the VO considers there are no items which meet the requirements of the regulations VO 7348 (found within the EDRM case folder) should be used to explain the reason for no certification.

1.11 Replacement certificates

1.11.1 If the VO forms the opinion a certificate is now inaccurate then a fresh certification should be made. This might be because the rateable value of the hereditament is corrected following discussions on a proposal. The new certificate replaces the old one and will have the same effective date as the original.

1.11.2 The only two exceptions to this are where the reduction is in relation to an MCC and there is a direct value effect on the P&M, in this case the date of the reduction should be used. Secondly where the item of certified renewable energy has been removed; in this instance the VO should issue a nil value certificate from the date the item(s) were removed.

A copy must be sent to the BA.

1.12 Revaluation

1.12.1 New certificates will be needed following a general revaluation. The billing authority will need to request these.

1.13 Billing Authority requests

1.13.1 BAs should only request certificates where they reasonably believe there to be separately identifiable P&M used for generating electricity or a need for a Class D apportionment. The responsibility is with the BA to identify relevant hereditaments. A blanket request for a certificate for all new hereditaments should not be entertained; requests need to be made individually with details. The BA needs to identify both the hereditament and P&M in its request otherwise the request should be returned.

1.14 Form of certificate

Certificates should be issued using VO 7344 (Class D) or VO 7346 (Class E) both can be found within the EDRM case folder.

1.15 Recording of certificates

A record should be kept of certificates issued or not required by adding remarks to the RSA case.

1.16 Retention of certificates/letters

Certificates or letters should be retained in the case file on EDRM.

12. Reserved

Partly occupied hereditaments

Apportionment of rateable value for a partly occupied hereditament

1. Legislative background

Section 44A of the Local Government Finance Act 1988 provides that where a hereditament is shown in a local non-domestic Rating List and it appears to the Billing Authority that part of the hereditament is unoccupied but will remain so for a short time only, the Authority may require the VO:-

a. to apportion the rateable value for the hereditament between the occupied and unoccupied parts; and

b. to certify the apportionment to the Billing Authority.

The apportionment of rateable value by the VO is conclusive, not subject to appeal and does not have to be agreed with the Billing Authority or the occupier.

The rateable value to be apportioned is that shown in the list for the day under consideration as stated in the Billing Authority’s request and is a reference to the rateable value shown under section 42(4) reflecting the physical circumstances existing on that day.

2. Apportionment of rateable value

A Billing Authority’s request to the VO for an apportionment of the rateable value of a hereditament which is only partly occupied must be made in writing and should include:-

a. the occupier’s name;

b. the Rating List details of the hereditament; and

c. details of the accommodation, which the authority regard as unoccupied.

In practise the ratepayer and Billing Authority may agree the parts of the hereditament that are unoccupied and the VO should not normally question the units or date for which the apportioned figures are required. However, if there is immediately available to the VO clear indication that an error has been made in the information provided, or other matters, the BA should be advised of such concerns and given the opportunity to confirm the instruction or revise the application.

The apportionment of the rateable value (reflecting rateable plant and machinery where appropriate) between the occupied and unoccupied parts should be made, without inspection of the premises, by reference to the recorded valuation for the assessment appearing in the Rating List in respect of the whole hereditament for the day of the apportionment.

3. Register request

All requests for the VO for an apportionment of the rateable value of a hereditament should have a Valuation Officer Report (VOR) case created on RSA ensuring that ‘Section 44A’ is selected from the list of values available in the Special Process Code field on the Case Details’ screen.

The report reason code should be 11 – Other(Alteration) – Enter ‘Request for Section 44A’ in the reason description box.

Where an acknowledgement is to be issued a user should ensure that a ‘tick’ is inserted in the ‘Print Ack’ field on the Contact/Parties screen.

All ‘Section 44A’ cases should be allocated to a nominated caseworker to prepare the ‘Certificate of Apportionment’ immediately following registration.

4. Certificate of apportionment

The certified apportionment should be issued to the Billing Authority on form VO 7060 within two weeks of receipt of the BA’s request.

The VO’s copy, together with the originating BA request, should be filed in the appropriate Core Records wallet.

Note once EDRM goes live then the originating request if not received electronically should be scanned and retained within the unique property records. The VOs copy of certificate should also be stored electronically within EDRM.

5. Clear case

All ‘Section 44A’ cases should be cleared as ‘No Action’ on RSA using No Action Code 8 – Aborted.

The date of issue of the certificate should be recorded in the ‘Resp Date’ field and the appropriate ‘Resp Type’ selected from the list of values available on the ‘Contact/Parties screen.

Case remarks recorded should include the Apportionment figures.

6. Further action

Where it is suspected that the present survey or valuation is incorrect as a result of the information contained in the Billing Authority’s request, the certificate should still be issued, within the time limits specified, on the basis of the VOs file information. As a matter of good practice where the VO is aware that a revision may be required, the first certificate ought to be noted to that effect.

To ensure that billing authorities and ratepayers may quickly receive accurate information upon which to base rates liability, after issue of the certificate a further VOR should be raised immediately, this VOR should be cross referenced to the original request case – but no Special Process Code is required. The property should be inspected, and action to alter the list taken at the earliest opportunity, within the normal time limits for dealing with internally raised reports. Should the survey on which the apportionment was based be inaccurate, or the list is altered see paragraph 7.

7. Revision of a certificate

Where the VO becomes aware that a certificate has become inaccurate, either due to incorrect survey information or following subsequent changes to the list entry, the VO should revise the inaccurate certificate without further prompting from either the Billing Authority or the ratepayer. A request from the Billing Authority is not required for a revised certificate.

A new certificate should identify the earlier certificate and advise the BA that it is a revision and replaces it.

A list alteration that has effect for the date of the apportionment for which the certificate is required may arise from:-

a. VO List alteration, or

b. settlement of a proposal

Alterations which have an effective date limited by Regulation 13A of The Non-Domestic Rating (Alterations of Lists and Appeals) Regulations 1993(SI 1993/291) may not cause the list to be actually altered for the day contained in the certificate request. Therefore, in most of these cases, a revised certificate will not be required nor issued.

However, where the factual information on which the certificate was based is shown to have been inaccurate for the day of the apportionment it may be necessary for the certificate to be revised. For example; whilst the correction of survey details may not, or cannot, affect the rateable value shown in the list, it may cause the apportionment of that rateable value to change.

For the avoidance of doubt, a change in the valuation approach to any class of property, as a result of litigation or policy change introduced after the date for which the certificate is required, will not require a revised certificate. Should a VO be approached by a BA for such a revision, which may result from a ratepayers request, the VO must seek further advice from the Technical Adviser.

8. Credit-taking and returns

Monitoring of work undertaken on requests for Section 44A certificates will be carried out via the CDB and SAS returns.

Appendix 1: VO7060

To: The Clerk to the Charging Authority

Your reference

Our reference

Please ask for

Date A Valuation Office

Inland Revenue

Partly Occupied Hereditaments

Certificate of Apportioned Rateable Value

Address




Assessment number


I refer to your request dated———————— for my apportionment of the rateable value of the above property for the purposes of Section 44A of the Local Government Finance Act 1988.

I certify the apportionment is as follows:-

Occupied part = £—————— rateable value

Unoccupied part = £—————— rateable value

Valuation Officer

VO 7060