Backdated tax demands being sent to businesses with offices in communal blocks are “particularly unfair”, the head of a committee of MPs has said.
Dubbed the “staircase tax” by critics, business rates in England and Wales are being set depending on how many rooms are being used and how they are linked.
Those with more than one office linked by a communal lift, corridors or stairs are being charged more.
Treasury Committee chair Nicky Morgan has questioned the move.
In a letter to Melissa Tatton, chief executive of the Valuation Office Agency (VOA), which sets the rates, Mrs Morgan has asked how many businesses are being hit and what is being done to mitigate the impact.
“On the face of it, it seems unfair to tax businesses differently depending solely on whether the staircases between their rooms are communal or private,” she said.
“It seems particularly unfair for the increase in rates to be backdated. I have written to Ms Tatton to ascertain the reasons for the VOA backdating it. “
- Small firms hit by rates relief delay
The change – and the backdating of rates – was the result of a ruling in the Supreme Court which the VOA said had clarified the law and given it no choice but to send the fresh demands.
Among those to have received them is Carolyn Saddington, the director of digital marketing agency Loyalty Matters, based in Harrogate.
The 54-year-old said the agency was spread over three offices on two floors of a building.
“Our offices – because they are separated by a [communal] staircase and a small amount of carpet – are now assessed by the Valuation Office as three separate properties,” she told BBC Radio 4’s You and Yours programme.
She said if they had an office that was a single unit, then they would be eligible for 100% rate relief, but the current situation meant they would only receive relief on one office and had to pay rates on the other two.
She has received a backdated rates demand of £4,000 and a charge of £2,000 a year from now on. It was “a bit of shock”, she said.
“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,” she added.
Mrs Morgan, in her letter, questions why the recalculated rates are being backdated. She also asked whether there is any analysis on the winners and losers under the new rules.
She has also asked for details on how many businesses are affected, an estimate of the typical increase or fall in rates, and what transitional relief is available.
The Federation of Small Businesses (FSB) estimates that 80,000 properties are affected. It said the levy was “ridiculous” and there was cross-party support in Parliament to help affected businesses.
“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,” said Mike Cherry, national chairman of the FSB.
“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.”