Startup Advice

Watch out for the government's 'staircase tax', warns the FSB

Oliver Jones

Small businesses could be tripped up by new tax rules

As small businesses owners find themselves tripped up by new tax rules, the government may find it has taken things one step too far.

A recent Supreme Court ruling means that small businesses across England and Wales could face rises to their business rates.

The ruling allows the Valuation Office Agency (VOA), which is responsible for assessing council tax and other taxes on properties, to charge businesses for every floor the business occupies. Previously, a single firm in a single premise received a single bill.

The move has been slammed by numerous public figures, including cross-party MPs and the Federation of Small Businesses.

Thousands affected

Mike Cherry, National Chairman of the FSB, was particularly critical, calling the tax “regressive” and “fundamentally flawed”. He warned that thousands of businesses could be affected at a time of unprecedented uncertainty over Brexit.

The change has been dubbed a “staircase tax”, since it effectively charges firms more for the possession a communal staircase. Companies using a private staircase will not face the same rise.

Tripping on their shoelaces

For many firms this means sharp, unanticipated hikes in their tax payments, as the rates are backdated as far back as 2010 in Wales and 2015 in England. Ironically, this includes the VOA, which operates across multiple floors in its Manchester and Halifax offices.

The backdating of tax rates is often frowned upon because it saddles businesses with unforeseen costs, as business owners 2 to 5 years ago had no way knowing their choice of premises would be so heavily taxed.

Cross-party outrage

The new tax has also been criticised by Lib Dem leader Vince Cable, Labour’s shadow business minister Chi Onwurah and the Commons Treasury Select Committee chairwoman, Nicky Morgan. There have been calls for the Chancellor of the Exchequer, Phillip Hammond, to intervene personally.