‘Staircase tax’ sees business rates on the rise
Many small businesses have been on the receiving end of substantial business rate bills this year, as the government’s Valuation Office Agency (VOA) has started to act on the implications of a 2015 Supreme Court ruling that was delayed by two years. Some businesses which operate from different rooms or floors have seen particularly large increases in their bills, which has led to the ruling being referred to as the ‘staircase tax’.
If a business has more than one office linked by a communal lift, corridor or staircase, their business rates will now be higher as each office is considered a different premises. To illustrate the absurdity of this ruling, imagine a business that has two offices on one floor that share a wall but are linked by a communal corridor. Under the new valuation process, they will be considered two separate premises. If, however, part of the shared wall were to be knocked down and a door installed to link the two offices internally, then the VOA would deem it to be one premises.
The financial impact of this ruling for small businesses has been exacerbated further by the recalculated rates being backdated to 2015 in England and 2010 in Wales. Therefore, businesses in England that have seen their rates increase will not only need to pay more from now on, but also the previous two years.
If the new rates remain unchanged, then it is almost certain that many small businesses will have to look to cut costs in other areas so that they can continue to operate. For some that might mean making staff redundant, whilst others will scale back or scrap entirely any plans for investment and expansion. Unfortunately there may also be some businesses who are unable to absorb the higher rates and are either made bankrupt or are forced to close.