Stairway to Heaven or Dazed and Confused?

(Apologies to Led Zeppelin fans for borrowing the band’s song titles).

King William III brought in a Window Tax in 1696 and George III introduced a Brick Tax in 1784. The Cameron-Clegg coalition had its bedroom tax in 2012, and now we have the government’s so-called “staircase tax”.

The staircase tax sums up recent changes to the way business rates are calculated, after the Supreme Court ruled that company offices in the same building which are separated by shared corridors or stairs must now be treated as separate businesses for tax purposes. It is estimated that 90,000 small businesses may be affected by these re-assessments, which were carried out by the government’s Valuation Office Agency.

Business rates, the commercial equivalent of Council Tax, are calculated on the potential rental value of a company’s premises, multiplied by an annually adjusted figure. A re-evaluation of business rates which came into effect in April has also seen sudden and in many cases unaffordable increases in the amount of tax due, with estimates that 30,000 businesses may be faced with bills of up to £15,000. Firms are liable to prosecution if they do not pay, and while there is an appeal procedure in place HM Revenue and Customs admits that one in five appeals have yet to be resolved, leaving businesses in limbo as to their financial liability.

The Federation of Small Businesses suggests that the worst-affected sectors will be retail, manufacturing and hospitality, and that the future of many shops, pubs, restaurants, factories and offices could be threatened by the changes. Businesses in England are angry that although introduced in April, the changes are being back-dated to 2015, whilst in Wales the new rates are back-dated to 2010. Many owners argue that they made business decisions, such as investing in equipment or taking on extra staff, based on expected profits, only to see these profits wiped out overnight by the new business rate evaluations.

A survey by the FSB indicated that 36% of businesses expected their business rates to rise, some by as much as 40%. Around 20% of business owners said they might be forced to sell up or close, and many more indicated that they would see a fall in profits, reduced investment, and possible redundancies. Many business leaders and politicians have urged the government to look at removing the staircase tax, describing it as unfair and irrational. Tory MP Grant Shapps, chairman of the cross-party national infrastructure group in parliament has argued: “The last thing small businesses need is a steep increase in their business rate due to the staircase tax.”

At a time when our high streets are losing more and more independent shops and businesses, allied to perceptions that large corporations such as Google and Amazon are escaping their full share of taxation, surely the government should do more to support, rather than hinder the success of the small business sector. After all, nearly 16 million people, or 60% of all private sector employment in the UK, are employed by small or medium-sized enterprises (FSB figures).

For help and advice on commercial property transactions please contact commercial property solicitor Kamal Mustapha at Bretherton Law on 01727 869293 or email kamalmustapha@brethertonlaw.co.uk

For further information see:  https://www.fsb.org.uk/media-centre/small-business-statistics

Also:  https://www.fsb.org.uk/first-voice/business-rates-and-how-it-effects-small-business-owners

Editors note:

Since this article was published this article has appeared on the BBC news site: ‘Unfair staircase tax’ for offices challenged

 


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