The business rates staircase tax, which unfairly affects up to a thousand businesses, is being scrapped.

Draft legislation has been published to ensure that the tax is abolished with retrospective effect. The step was first announced in the 22 November 2017 Budget.

A recent Supreme Court judgment saw hundreds of businesses operating in adjoining units or rooms, but accessed from a common corridor or staircase, receive separate rate bills for each unit.

The ruling resulted in businesses facing higher rate bills, with some paying even more due to the loss of small business rate relief.

The new legislation will allow affected firms to have their rates recalculated under the old single bill system, with any savings due backdated.

Staircase tax case

The Supreme Court case of Woolway v Mazars brought about a change in how the Valuation Office Agency (VOA) assessed rateable values for businesses.

The ruling mean that businesses who occupied more than one property in a shared building received a separate rates bill for each unit. This became known as the ‘staircase tax’ and meant businesses in adjoining units who had previously received one rates bill, were now being subject to several bills.

The court case overturned an established and widely understood practice where businesses occupying two adjoining floors, or two rooms separated by a wall, only received a single bill.

Once the government’s draft legislation is enacted, those businesses who have been directly impacted by the court case can request the VOA to retrospectively recalculate valuations based on previous practice.

COMMENT: Whilst the move to scrap the staircase tax is welcome, it is not clear why it has taken so long for the government to act, particularly as the VOA has been imposing the tax on businesses for some time, and the required amendment to the legislation to scrap it was so small. It is also unclear when the government will carry out its promised full review of the business rates system, an issue on which many business groups (and Bishop Fleming) have long campaigned.

If you wish to discuss the issues raised in this article, please contact your usual Bishop Fleming adviser, or a member of our Business Tax team.

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