Staircase Tax: Will your Business be Affected?

There has been a great deal of noise this week about the so-called ‘staircase tax’, but what is it and how will your business be affected? General practice surveyor Phil Dickins gives an overview.

The government’s Valuation Office Agency (VOA) has been acting on the results of a 2015 Supreme Court decision that relates to how a business space is defined for rating purposes.

As a result, the VOA has started to allocate different business rates assessments for individual floors and workspaces separated by public areas.

In practice, this means increases for those small firms that occupy separate floors of a single building as any discount for size is removed.

It’s been dubbed a ‘staircase tax’ as companies are being penalised, in effect, for having to use shared rather than private stairs in a single occupied building.

While some ratepayers will be adversely affected, sensationalist claims are being made in certain quarters.

Some press reports have failed to put the ‘tax’ in its correct context.

While it impacts on occupiers whose premises are separated by common parts, it does not affect occupiers of entire buildings where there are no intervening interests.

The Valuation Office explanation is in full below.

A Supreme Court decision about how the VOA values non-domestic buildings which are occupied by more than one person or a business could mean a change in business rates for some ratepayers.

The decision in the Supreme Court case ‘Mazars vs Woolway’ means that we have had to revise how we value properties where occupiers use two or more separated spaces within the building. We are now legally obliged to treat different areas of the same building (which are accessed through communal areas) as separate premises for business rates purposes. We had previously valued separate but adjoining areas (occupied by one individual or company) as a single property.

For example, in a multi-storey office building with different occupiers, where two consecutive floors are occupied by the same person or company, these would have been considered as one “property” for business rates purposes. Following the Supreme Court’s decision, these must now be considered as two separate properties.

What this change will mean for ratepayers

If you are affected by this issue, you may be issued separate bills for different parts of your property and your overall rates bill could increase. This change may affect the business rates you have already paid, as any changes your business rates are likely to be backdated to whichever is the most recent:

  • 1 April 2015 in England or 1 April 2010 in Wales
  • The date you became the occupier

If we believe that your property may be affected, we will contact you and advise you on what will happen next. Unless you hear from us, you don’t need to do anything. Until we review each property, we will not be able to let you know whether your property is affected, or how much your rates bill could change.

About Phil Dickins

A landlord and tenant specialist with more than 25 years experience, Phil is currently instructed on a wide range of rent review and lease renewal cases across most commercial sectors within Devon and Cornwall. Receiving appointments from the Royal Institution of Chartered Surveyors, Phil also acts in the capacity of both an arbitrator and independent expert in connection with the resolution of rent review disputes, in addition to providing strategic valuation and technical input to both landlords and tenants in both the corporate and private sectors in connection with various aspects of leases, including re-structuring. Rating consultancy and acquisition advice is also provided on an ongoing basis to owners and occupiers of property including retail, motor trade and industrial concerns of significant importance to the local economy and also specialist property sectors.