Just under 30,000 SMEs will be hit by large rate uplifts as ‘staircase tax’ comes into play meaning SMEs who have more than one floor in the same building are having to pay rates as if they were on separate premises.
Chancellor, Philip Hammond is feeling the pressure while trying to plug the legal loophole, similar to Victorian tax on windows meaning businesses will have to pay significantly more rates for having more than one floor, as tenants do with the more occupants they have. For businesses that occupy an entire building or can access their offices via private staircases are excused from the increase.
The ruling of the Supreme Court gave permission to the Valuation Office Agency (VOA) to charge businesses separately for having more than one office on different floors or corridors. A portion of SMEs may face a rate increase of up to £15,000 due to the new tax – businesses in England will see rates backdated to 2015 while businesses in Wales will see the tax backdate all the way to 2010.
Conservative MP, Jacob Rees-Mogg has pushed Hammond to shut down this loophole in the next budget and delay the retrospective charges.
National Chairman at the Federation of Small Businesses (FSB), Mike Cherry comments;
“This latest twist in the business rates tale serves as yet another reminder of what a regressive system our entrepreneurs are faces with when it comes to this tax.
“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? And these bills are backdated, stinging firms that are still waiting on delivery of relief measures announced more than five months ago.
“Enough is enough. 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.”
Business owners feel the ‘staircase tax’ is unfair and singles out small to medium-sized businesses who typically grow their businesses by obtaining additional office space. Lots of enterprises are no longer entitled for rates relief – which is available to businesses with premises of which have a rateable value of less than £12,000.
A spokesman from the VOA said;
“The Valuation Office Agency has a responsibility to maintain a correct and up-to-date rating list. As a result of the Supreme Court’s decision, we had to change how we value some properties for business rates.”
Head of Business Finance at Businesscomparison.com, Laura Thomas also comments;
“It seems to be an unjustifiable ruling to penalise those businesses that operate on more than one floor in a building with a shared staircase. Businesses have not made provisions for this backdated tax, and therefore yet again going to have to dig deep to meet their obligations if this does indeed come into play. Let’s hope common sense prevails and the loophole is shut down.”