Staircase tax reversal becomes law

It seems that rating legislation has some similarities to buses; you wait a long time for an Act of Parliament, and then two arrive at once! We have commented earlier in these News pages about the 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.

The Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act became law on 1 November 2018. The Act allows properties that are “contiguous”, and are in common occupation, to be treated as a single hereditament even if, under the Mazars ruling, they might otherwise not be. Contiguous properties can include 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”. Properties may also be treated as a single hereditament where they are contiguous, but are separated by a “wall, fence or other means of enclosure”.

The Act allows the Minister to make regulations that will allow ratepayers whose hereditaments have been split to apply to the VOA to have hereditaments treated together. The Act also 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. The regulations to allow this have not yet been published but are expected soon. They may be tied in with those relating to Nursery Grounds, also commented on in these news pages. We expect that ratepayers will have a year from the date of the new regulations in which to take any action. So 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 for the Regulations to be published.