Tretton Review Group minutes: 28 August 2018

Attendees and apologies

Attendees

Membership

• David Tretton, Meeting Chair
• Kenny Hunter, Hunter Hydro
• Alastair Kirkwood, Scottish Assessors Association
• Fiona Grant, Heriot-Watt University

Secretariat

• Ian Storrie, Scottish Government
• James Messis, Scottish Government

Also in attendance

• Stephen Hutt, Green Highland
• Bill Gillies, Scottish Assessors Association

Items and actions

The group thanked Fiona for hosting the group at the Heriot-Watt University campus.

1. Analysis

The group observed the analysis, carried out by the hydro sector, which was shared with the group ahead of the meeting. This led to discussion about the relationship between capital costs and non-domestic rates and how the results mean that there are certain beneficiaries and others that are adversely affected.

From the data, the group noticed that schemes with a higher load factor are more affected than schemes with a lower load factor.

The group discussed how the government subsidised scheme may create an exceptional set of circumstances in relation to the use of the Receipts and Expenditure approach.

2. State Aid

The group discussed the issues caused by the State Aid De Minimis cap, and, highlighted that the data shows that a number of the schemes would be capped by state aid for any relief.

The group discussed the state aid assessment, and considered what might be deemed to be ‘single undertakings’ and questioned circumstances of multiple ownership - whether those with an ownership share in more than one scheme might find they hit the cap earlier. The view was shared that in this instance, it might be that a state aid assessment is made based on where there is a dominant interest.

The group discuss that any project over 1.3 mW capacity may be in breach of state aid.

3. Degression

The group then discussed whether the assessor’s note accurately captures degression in the different years. This developed into a discussion about FIT schemes and the difficulties in establishing a rateable value based on FITs from previous years. Currently practice notes do not factor in degression after the tone date – 1 April 2015. The group also considered whether this was part and parcel with rates given that property values change after the tone date. Members of the group posited that there is a problem if assessors are using FIT rates at the tone for schemes built after the tone date.

The general view of assessor’s was that that the rates are frozen at the time of the tone date. Just like every other non-domestic premises in the valuation roll, where rateable values are based on a snapshot at 2015, a property value can change after that tone date.

The group acknowledged the distinction in the case of FITs as they are planned to diminish, whereas other properties can appreciate as well as depreciate in value. 

Action: The assessors would look at an approach during/between valuations

4. Valuation and exemption

The group acknowledged the challenges of employing alternative methods of valuation. The group agree that valuation and the methodology, Receipts and Expenditure, is working correctly. It is the economics that is the issue.

The group considered the possibility of an exemption of the powerhouse and the turbine. However, they highlighted some difficulties associated with this:

• Legal advice suggests that the valuation of the sector may still fall under lands and heritages, and would still be rateable
• The point was raised that it is not the whole sector that has a problem. Therefore, a measure which will change valuation for the whole sector, and perhaps other sectors, is far too broad
• For some of the schemes the period of difficulty is transient, lasting only for the first 7 years. An exemption is not nuanced enough to fit the disparate needs across the sector

The group agree that the Hydro sectors preference is for exemption.

While the group agree that action needs to be taken, they disagree on the specific action going forward – there is not a consensus for exemption and it is not the popular option amongst the group.

5. Relief

The group looked at the different outcomes for 500kW. It was pointed out that a relief is more flexible to the needs of Hydro and also can be adapted as the challenges change.

The group discuss the merits of relief and exemption. They discussed how if the scenario changes the relief could flex to it. It is necessary that any relief be elastic.

The group agree that if the relief option is pursued then the principles that it is based on must be set out

Action: Scottish Government Analysts to look at the data.

The group agree that the collective work of the group will provide the basis of the report.

The group discuss the Plant and Machinery review and whether there would be any implications that might change the circumstances for Hydro and how there may be a possibility of re-visiting whatever action is taken on Hydro based on the outcome of the Plant and Machinery review.

The group agree to commit to another meeting to sign-off.

The group recommends that the Hydro sector share information and work more closely with the assessors.