Up to 30,000 small businesses face large rates increases under a new “staircase tax” that treats different floors in the same building as separate premises.
Philip Hammond, the chancellor, is under pressure to close the legal loophole — likened to the Victorian tax on windows — under which firms occupying multiple floors in a building that houses more than one tenant will be charged thousands of pounds more.
A Supreme Court ruling allows the Valuation Office Agency, which recalculated business rates this year, to levy rates individually on offices on separate floors or corridors, where previously they were treated as a single premises. Some companies face rate increases of up to £15,000 as a result of the changes, which will be backdated to 2015 in England and 2010 in Wales.
Jacob Rees-Mogg, the Conservative MP, has urged the chancellor to close the loophole in the next budget and halt the retrospective charges. Companies that occupy an entire building or can access multiple floors via a private staircase are exempt from the increase.
Company owners believe the change unfairly penalises medium-sized enterprises and start-ups, which tend to grow their businesses by acquiring new office space in increments. Many are no longer eligible for rates relief, available to companies with premises that have rateable values of less than £12,000.
One business seeking new accommodation said the increase was “reminiscent of the Victorian window tax”.
“Any sensible person can see 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,” it added.
A spokesman for the agency said: “The Valuation Office Agency has a responsibility to maintain a correct and up-to-date rating list. As a result of the Supreme Court’s decision, we had to change how we value some properties for business rates.”