The Staircase Tax – What is it?

Despite the verdict of the Supreme Court being announced all the way back in 2015, the staircase tax has really only begun to caught controversy in the press in the last few months.

Businesses across the UK are increasingly anxious to know what the staircase tax ruling will mean for their business rates and their inevitably higher bills.

 

How they’re worked out

The Government Valuations Office sets an “open market rental value” for every commercial premises in the UK.

This is based on the current market conditions and designed to be in line with similar properties in similar locations. Rent Officers regularly inspect commercial properties, and the Valuations Office then decides the rateable value which is a major factor in determining what you should pay in business rates.

If you’re currently working in or about to move into a commercial property and you want to work out what the open market rental value for your premises are/will be, you can visit the government website.

You can use your open market rental value to then work out the size of your business rates bill. If your OMRV is £12,000 or less, you won’t have to pay any business rates.

If your value is between £12,001 and £14,999, then you will receive pro rata relief on your business rates. Say your OMRV is £13,500. You would multiply it 0.466, then times that by 50% to get your business rate bill.

Everything between £15,001 and £50,999 would be multiplied by 0.466. For an open market rental value over £51,000, you can simply multiply that number by 0.479 to work out how much you’ll pay in business rates.

These rates will be different in the City of London, so if you need help working out your business rate bill, talk to one of our trusted accountants at Smart Team today.

 

The new staircase tax

The ruling of the Woolway (Appellant) v Mazars (Respondent) case changed the way business space was defined.

No longer could companies occupying multiple floors in one commercial property receive just one business rates bill. Now, some employers are reporting being charged three times over for a single property.

Different bills are allocated for individual floors and workspaces if they linked by public areas. Businesses with a private connecting staircase or lift will still only receive one business rates bill. A communal staircase between two floors of the same business now means two separate bills for the owner, meaning many are now struggling.

Carolyn Saddington, director of digital marketing company Loyalty Matters, told BBC News Online that her agency has three offices spread across two floors of a building.

Since the rule came in, because they were “separated by a [communal] staircase and a small amount of carpet” were now being assessed by the Valuation Office as three separate properties.

She continued, “The ridiculous thing is that there is a wall between two offices. We could knock a door through then the Valuation Office would have to assess it as one property. It is absolutely crazy.”

Saddington also told the BBC that only offices in a single unit are eligible for 100% rate relief. So, whilst her company receives 100% tax relief on one office, they still have to pay the full rates on each of the other two in the same building.

 

Is the tax here to stay?

Whilst there have been calls to reform this system that has the potential to financially drain many small businesses, it’s possible things could still get worse.

Documents from the Valuations Office were recently released by the Sun newspaper stating that “car parking needs to be separated from offices – this cannot be avoided.”

So, it appears currently that it is more than likely that further costs will ensue in the near future.

 

Find out more

If you’re concerned about the staircase tax, business rates, and how they will affect your SME, talk to someone from Smart Team today on 01202 577500 or email us at [email protected] for help with this important and expensive area.

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