Conservative MP Nicky Morgan is pushing the UK’s property tax agency to detail the impact of the so-called “staircase tax”, amid fears that firms could be forced to stomach a 5,000% hike in bills.
The Treasury Select Committee chairwoman has written to Valuation Office Agency (VOA) chief executive Melissa Tatton for details on how businesses may be hit by the contentious levy.
“At first sight, it seems unfair to tax businesses different depending solely on whether the staircases between their rooms are communal or private,” Morgan said in her letter.
“It also seems particularly harsh for the increase in rates to be backdated, and I would be interested to know the VOA’s reason for backdating it.”
The staircase tax is the result of a Supreme Court ruling on the definition of a single business space.
It means offices covering multiple floors in a building will be billed separately if their corridors or staircases are communal, rather than private to the business.
And for businesses that have expanded, the decision to take on offices in the same building as existing premises, connected by communal space, could now prove more costly than they first realised or planned for.
Morgan has asked the VOA’s Tatton to explain the decision to backdate the tax to 2015 in England and 2010 in Wales, and to provide details on how many businesses will face a higher rates bill as a result.
She has also requested information on the average bill increase that businesses will face and whether any transitional relief will be made available.
The tax has faced cross-party criticism, not only from Morgan, but from Labour’s shadow business minister Chi Onwurah and Liberal Democrat leader Sir Vince Cable.
It comes amid a backlash from industry groups including the The Federation of Small Business (FSB), which has warned many small firms could be set for a substantial hike in their bills, the Press Association reported.
“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,” FSB Chairman Mike Cherry, said.
“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.”
It is the latest tax debacle to hit British business this year, having been left reeling after the Government’s contentious business rates review this year.
The revaluation, which came into force in March, updated rateable values to take into account property price changes over the last seven years.
Business rent and rates specialists CVS said UK companies are already facing a £4.5 billion increase in business rates over the next 5 years, even before the staircase tax is introduced.
Cherry has called on the Government to repeal the new levy.
“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.”
It comes as Chancellor Philip Hammond prepares the first full Autumn Budget, expected to be presented to Parliament between late November to early December.