business rates

News - 20/11/2018

Staircase tax rate rebates result for ratepayers

Following new legislation, businesses will have the option of getting their business rates bills recalculated and any savings backdated

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Businesses will be able to ask for rebates on Business Rates following new legislation which reverses the effects of the “staircase tax”. This is an opportunity for businesses who occupy multiple, consecutive floors within the same building to potentially save hundreds of thousands of pounds, depending on the size and location of their business.

The Government has, at last, enacted legislation which helps businesses who suffered from retrospective increases in Business Rates (commonly referred to as the “staircase tax”) following the application of assessment principles drawn from a Supreme Court judgement known as “the Mazars Case”

Following the Mazars judgement, the Valuation Office Agency has been splitting rating assessments back to the 1st April 2015 (and in some cases 1st April 2010).  This has resulted in backdated increases in rate liability for many businesses.  The most significant of these increases in financial terms have related to offices in city centres. 

For example, a large office assessment in a Northern city comprising 10 floors originally assessed as one unit at £2.175million was split into 10 separate assessments (floor by floor) which totalled £2.73million – a 25% increase in rateable value back to the 1st April 2015.  This resulted in an unexpected retrospective rates bill of over £550,000 for the business concerned.

The impact of the Mazars judgement also meant small businesses operating in adjoining units, such as serviced offices, accessed purely via a common corridor and not internally, would receive separate rate bills for each unit – thereby losing out on claiming small business rate relief (a key qualifying criterion for which is that the ratepayer occupies only one rateable property in England).

This legislation now returns to the previous assessment approach whereby the adjoining units in this situation would be assessed as one and the business would be able to receive small business rate relief operating from one assessed unit

The Government eventually fully acknowledged the unfairness of these situations and committed to reversing the unintended consequences of the Mazars Case. The recent legislation which has now been enacted will reinstate the practice of the Valuation Office Agency prior to the Mazars decision.  Assessments split as a result of that decision will in, many cases, be merged back together. Changes can only be made, however, at the instigation of the ratepayer.

As a specialist in business rate valuations and appeals, I welcome this legislation.  The detail of the application, however, is still awaited and further regulations are anticipated to enable the outworking of the Act. 

There is likely to be a defined appeal window (probably a year) in which a ratepayer will be able to apply for reinstatement of assessments that existed previously, but there are bound to be grey areas which may require further litigation.

Whilst I am concerned about the ability of the Valuation Office Agency to cope with these additional appeals while they’re preparing for the 2021 Rating Revaluation (which has a valuation date of 1 April 2019) and also dealing with the 2017 Revaluation appeals, this is an opportunity for businesses affected by the controversial ‘staircase tax’ to get reimbursed and perhaps reinvest refunds at this currently challenging time in the economy.

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