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In the 2017 Autumn Statement the Chancellor announced that the Government would introduce legislation to reverse the effects of the Supreme Court judgment in Woolway (VO) v Mazars LLP; the so-called “Staircase Tax”. The effect of that decision was that properties that were contiguous one with another, but which did not directly intercommunicate with each other, such as adjoining floors in a multi-let office building, should be treated as two separate hereditaments for business rates, rather than as a single hereditament as they had previously been treated. This affected up to 80,000 properties in England and Wales and resulted in the Valuation Office Agency (VOA) splitting many rating assessments into two or more separate assessments. The effect of this was that a number of ratepayers saw significant increases in their rates bills through loss of small business rate relief or for other reasons and some of these increases were backdated to 1 April 2010.
Following the Chancellor’s announcement, the Government published a consultation paper about the legislation to give effect to this change. The consultation included a draft bill and we commented in our news post on the proposed legislation. Having considered the responses to that consultation, the Government has amended the draft bill and the amended version of it has now been introduced into parliament. The principal amendment to the bill, from the consultation draft, is that it now incorporates provisions allowing empty properties to be treated as a single hereditament where they are contiguous and in common ownership. Previously, these proposals had applied only to occupied property.
There are other, more subtle, changes in the Bill as it has been introduced to parliament, compared to the consultation draft. These relate to the definition of “contiguity” that will allow separate hereditaments to be treated as one. The first change is to allow adjoining floors to be treated as a single hereditament even where they may be separated by a service void between the floors. Different floors can be treated together where they are “on consecutive storeys of a building and some or all of the floor of one hereditament lies directly above all or part of the ceiling of the other hereditament”. This is an important difference to the previous definition which required that the floor of one property had to form part of the ceiling of another.
Secondly, properties may be treated as a single hereditament where they are contiguous, but are separated by a “wall, fence or other means of enclosure”. The earlier draft required that the contiguity had to be by means of a common wall. The new definition will deal more readily with hereditaments that are more than just buildings, such as buildings with associated land.
Once the Bill has been through parliament and has the Royal Assent, it will be open to ratepayers whose hereditaments have been split to apply to the VOA to have hereditaments treated together. The Bill allows such applications to be retrospective to 1 April 2010, where appropriate, so this provision will apply to the previous 2010 Rating List as well as to the current, 2017, List and future lists. Those ratepayers who have been adversely affected by the fallout from the Supreme Court’s decision in Woolway (VO) v Mazars LLP will be watching keenly as the Bill progresses through Parliament.
