Just when you thought the new business rate system couldn’t get any worse for UK SMEs, it now appears that many small businesses may be penalised by the Valuation Office Agency and face large backdated bills if their business premises straddles two or more floors and uses a shared staircase to access upper levels of the commercial building.
Small businesses and the issue of commercial staircases
Small businesses across England and Wales are being hit with backdated business rates increases due to changes in the way the Valuation Office Agency (VOA) assesses commercial staircases. So what’s the issue? Well, previously small firms that occupies multiple floors within a commercial property would simply receive a single business rates bill which covered all occupied areas. However, as a result of a ruling by the Supreme Court, small businesses now receive individual rates bills for each floor they occupy, provided the areas between the floors are communal. For small businesses which occupy multi-floor premises but access upper levels via a private staircase/ walkway, things will not change, and they will continue to receive a single rates bill.
The problem for many small businesses which trade in mixed-use buildings on different floors in England and Wales is that they will now be treated as separate premises and they will therefore receive two bills – one for each floor. This will substantially increase business rates bills for many small businesses. The problem is also compounded by the fact that these increased charges will also be backdated to April, 2015 in England and April, 2010 in Wales.
Federation of Small Businesses calls business rates tax system regressive and anti-entrepreneurial
Mike Cherry, National Chairman of the FSB, criticised the way the VOA differentiates between businesses on the basis of whether or not they have access to a private or communal staircase, saying:
“This latest twist in the business rates tale serves as yet another reminder of what a regressive system our entrepreneurs are faced with when it comes to this tax.”
“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 [the] delivery of relief measures announced more than five months ago.”
“Enough is enough. Any sensible person can see that the business rates regime is fundamentally flawed, penalising firms before they made their first penny in turnover, let alone profit. A fundamental review of the tax is long overdue.”
How have HM Revenue & Customs officials responded to the criticism? Well, HMRC has said it will struggle to enforce the staircase tax because it has yet to resolve one in five of all business rate appeals across England and Wales – some dating as far back as 2010. This news was fiercely condemned by Ex-Business Secretary, Vince Cable. The current Liberal Democrat leader said:
“This underlines the unfairness and irrationality of the business rates system. Instead of hitting small businesses with an unfair staircase tax, the Government should focus on addressing this massive back-log of appeals. It’s unacceptable that a quarter of a million businesses are being left in the lurch.”
Chancellor of the Exchequer, Philip Hammond, now faces mounting pressure to scrap the new tax. Former colleague and fellow member of the Commons Treasury Committee, Nicky Morgan, has urged the Chancellor to intervene to resolve the problem:
“I certainly support the FSB on this – it can’t be right for businesses to suddenly be asked to find money for something they didn’t know they might be liable for,” she said.
If you own a small business and are in need of financial advice, then speak to Steven Glicher accountants. Our accountants can help your business identify the funding you’ll need, find the most suitable sources of finance, and help you with cash-flow projections, budgets and trading forecasts. For further information, call Steven Glicher accountants on 0161 485 8007, or email firstname.lastname@example.org.