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So, we’ve had the bedroom tax, which affected some UK householders. Now we have the staircase tax, which is affecting businesses – many of them SMEs. Before we’re all taxed on the height of the chair we’re sitting on, let’s look at the staircase tax.

What is the staircase tax?

Previously, when business owners bought or rented premises over more than one floor, their concerns over communal staircases were limited to security and access issues – and who might be liable if an unfortunate customer toppled down them. They were just a part of life for the many small businesses that occupied two or more rooms or floors of a small block or converted house.

But the ‘staircase tax’ – as its critics call it – has changed all that. The phrase refers to an additional charge put on the business rates of those business in England and Wales that have rooms/offices or floors linked by not just communal stairs, but also a communal lift or corridor.

Not only has the staircase tax been introduced – it’s also been backdated. For businesses in England, they will have this charge backdated to 2015, which is bad enough. But unlucky businesses in Wales will have their staircase tax backdated all the way to 2010.

So, where did this new charge come from?

Both the charge and the decision to backdate it are the result of a ruling in the supreme Court on the Woolway v Mazars case. Originally, chartered accountants Mazars successfully applied to the Valuation Tribunal and Upper Tribunal to have the two office floors it occupied treated as one hereditament. Mr Woolway of the VOA successfully appealed to have the decision overturned.

The Valuation Office Agency said the ruling clarified the law, obliged it to make and backdate the changes.

“The Valuation Office Agency has a responsibility to maintain a correct and up-to-date rating list,” said a spokesperson. “As a result of the Supreme Court’s decision, we had to change how we value some properties for business rates.”

Unpopular and ‘Particularly Unfair’

Coming so soon after a business rates hike for many small businesses, unsurprisingly, this extra charge is proving unpopular among them – particularly as rates relief is only available while your property’s rateable value remains at under £12,000.

It’s also provoked cross-party calls for a rethink. Chi Onwurah (Labour Shadow Business Minister) and Vince Cable (Leader of the, Liberal Democrats) have both spoken out against it, while of it, while Jacob Rees-Mogg wants the backdated charges delayed and the loophole closed. Nicky Morgan, Chair of the Treasury Select Committee, has written to Melissa Tatton, chief executive of the Valuation Office Agency (VOA), asking how many businesses will be affected and what will be done to mitigate that effect.

She said, “On the face of it, it seems unfair to tax businesses differently depending solely on whether the staircases between their rooms are communal or private. It seems particularly unfair for the increase in rates to be backdated.”

“This significant escalation of cross-party scrutiny of the staircase tax will be hugely welcomed by the thousands of firms set to be stung by this ridiculous levy,” said Mike Cherry, National Chairman of the FSB.

“No small business should receive a sudden tax hike of 5,000% simply because a workspace has been separated, for years, by a communal area, stairway or lift. Some small business owners are discussing whether to knock holes in their walls or stick a staircase on the outside of their premises.

“This is no way to run a tax system in the 20th century, let alone the 21st. Ministers have the power to provide relief, and they should do this urgently – to correct this defect in the UK tax system.”

Entrepreneurs Faced with a ‘Regressive System’

The Federation of Small Businesses (FSB) has estimated that 80,000 properties are affected by the rate change.

“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,” said Mike Cherry.

“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.

But it’s not just the little guy that’s suffering. In an ironic twist, it seems the VOA itself faces a bill of £100,000 – as it operates across multiple floors at its offices in Manchester, Halifax, Huddersfield and Crewe.

Mike Cherry said, “Reports that the VOA has managed to serve itself a hiked business rates bill as a result of the staircase tax underline how little thought it has given to this levy.

“The tax will disincentivise future growth, stinging small firms that expand operations within shared buildings. What’s even worse is that it’s hitting businesses that weren’t aware of the tax before they took additional work space over the last few years. We’ve heard from a number of small firms that would have made alternative arrangements if they’d known about the staircase tax.

“The government needs to end the charging of this ridiculous tax or risk stunting small business ambition at a time of unprecedented uncertainty and when the costs of doing business are already at their highest in four years.”

Has the staircase tax affected your business? How much more has it added to your business rates bill? Let us know.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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