Thousands of small businesses across England and Wales could be hit with a backdated staircase tax, after a Supreme Court ruling forced the government’s Valuation Office Agency (VOA) to change the way it assesses staircases in commercial premises.
Some 30,000 UK companies could be in line for backdated increases to business rates bills because of the so-called staircase tax, Business Advice understands, as the VOA – the government body that values commercial property– reassess tens of thousands of occupied premises.
The result of the Mazars vs Woolway Supreme Court ruling will see businesses that occupy several floors within a property given separate business rates bills for each individual floor, provided the floors are separated by communal spaces, including staircases, corridors and elevators.
Business owners will continue to receive a single business rates bill if their firm occupies multiple floors that can be accessed by private staircases or walkways.
Previously, businesses that occupied more than one floor within one commercial property would be given a single business rates bill, covering all occupied areas.
The change is likely to result in substantial business rates increases for affected firms. In England, any increases will be backdated to April 2015, whereas increases for companies in Wales will be backdated to April 2010. Bills may be given to ratepayers retrospectively, even if they’ve since vacated the property in question.
The “Mazars” ruling is expected to have particular consequences for companies it pushes over the threshold for business rates relief. According to the Federation of Small Businesses (FSB), some company owners, who’ve been forced out of rates relief as a result of this ruling, have been told they won’t qualify for the government’s £50 monthly cap set on bill increases for firms emerging from rates relief in 2017.
Expressing outrage, FSB national chairman Mike Cherry said: “How can it be right that you’re hit with a massively inflated bill simply because the staircase you use is shared and not private?
“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.”
He added that because the bills were backdated, the firms worst affected by this ruling would be those still waiting for the business rates relief measures the government set out at the Spring Budget over five months ago.
“Enough is enough,” Cherry went on to say. “Any sensible person can see that the business rates regime is fundamentally flawed, penalising firms before they made their first penny in turnover, let alone profit. A fundamental review of the tax is long overdue.”
Director for business rates at commercial property consultancy Lambert Smith Hampton, Beverley McDougall, advised owners who may be worried about how their premises will be affected following the Mazars staircase tax ruling to seek professional help.
She said: “Implementing the Supreme Court’s landmark decision will not only increase the number of rating assessments for many tenants and landlords, it will also increase their rates bills.
“It doesn’t just apply to offices – it can affect occupiers of other types of property as well. If you occupy more than one floor or property either vertically or horizontally, we would urge every ratepayer who thinks they are affected to seek advice now.”
HMRC rakes in extra £3.4bn from small businesses underpaying VAT
Sign up to our newsletter to get the latest from Business Advice.