Tax & admin · 6 September 2017

Staircase tax: Pressure mounts on government to scrap unfair rules  

The staircase tax could impact firms operating from different floors in the same building
The staircase tax could impact firms operating from different floors in the same building

The government has come under increasing pressure to scrap its planned staircase tax, after the extent of additional costs faced by businesses as a result of this year’s UK-wide business rates revaluation have been brought to light.

The chief executive of leading business rates agency CVS, Mark Rigby, has urged the government to step in and change the proposed staircase tax legislation, which has so far proved unpopular with small business owners and MPs from all parties.

He said: “The extra revenue that will be sought from businesses flowing from the ‘Mazars’ decision is nothing more than a stealth tax with offices already facing substantial increases in rates from the revaluation alone.”

“The government must re-write rating law to say any property which is contiguous, whether by exclusive access or not, can be classed as one hereditament. It’s a relatively simple change if there is political will and desire to do it.”

According to analysis from CVS, even without the implications of the staircase tax, the actual amount business owners will need to pay across the UK as a result of the new rateable values of premises brought about by this year’s rates revaluation, averaged out over a five-year period, represents a £909.9m per year tax increase.

The new combined rateable values of eligible premises as a result of the revaluation, which came into effect in 1 April 2017, have grown by £1.6bn.

Having analysed government statistics, CVS has found that the the 369,902 offices in England and Wales liable for rates on 31 March 2017 had a combined rateable value of £12.93bn (at the end of the 2010 rating list) but that as of 1st April 2017, this value had increased by 12.34 per cent to £14.53bn.

Last year, companies occupying offices in England and Wales paid £6.45bn in business rates in total for the 2016 to 2017 tax year. This was before the effects of the revaluation came into force, and these are due to increase rates over the next five years to £7.36bn per year on average.

The staircase tax, following the so-called “Mazars” judgment by the Supreme Court earlier this year, risks putting around 30,000 small England and Wales businesses in line for even further backdated increases to rates bills.

Companies at risk include those which occupy several floors within a property, provided the floors are separated by communal spaces, including staircases, corridors and elevators. Under staircase tax rules, these businesses would be given separate business rates bills for each individual occupied floor, as opposed to just one rateable value for the property.

Last month, national chairman at the Federation of Small Businesses (FSB), Mike Cherry, expressed the outrage of small UK firms towards the proposed staircase tax. He said: “This latest twist in the business rates tale serves as yet another reminder of what a regressive system our entrepreneurs are faced with when it comes to this tax.”

“A fundamental review of the tax is long overdue. Any sensible person can see that the business rates regime is fundamentally flawed, penalising firms before they made their first penny.”

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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