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Business rates: new treatment of properties in common occupation

Businesses operating across different floors of a building, or other separate but neighbouring units, are now more likely to have their premises assessed together for business rates.

The Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 came into force on 1 November 2018. 
The Act delivers on the government's commitment in the 2017 Autumn Budget to legislate retrospectively to address the so-called “staircase tax”. 
The changes made by the Act have effect only in England. 

What was the 'staircase tax'?

The 'staircase tax' comes from a 2015 Supreme Court case, Woolway v Mazars, which decided that separate units that are not interconnected and are only accessible by passing over land owned by a third party should generally be assessed separately for business rates. 

This meant that a business could be hit with separate rates bills for each floor of a building occupied by it, even where those floors were consecutive floors in a building. 

If (as is often the case) access between the floors was via a common stairway owned by the landlord, then separate assessments would apply.

What are the new rules?

The Act effectively reverses the "staircase tax" and a large part of the decision in Woolway v Mazars.

In summary, one rating assessment will generally now be applied to neighbouring floors or units occupied by the same business, so long as:

  1. they are "contiguous"; and
  2. they are not used for wholly different purposes.

Premises are contiguous with each other if they share at least part of a common boundary (e.g. a wall or fence), or if they are on consecutive floors and at least part of the floor of one unit lies directly above at least part of the ceiling of the other unit.

The Act makes clear that premises might still be contiguous even where there is a space between them that is owned or occupied by another person, for example the ceiling void between two floors.

These changes are retrospective as far back as financial years beginning on or after 1 April 2010. Affected businesses will be able to request a recalculation of any valuations made since that date.

What other changes are made by the Act?

The Act also amends the council tax treatment of empty domestic properties. Owners of property unoccupied for a significant period of time may be hit with a substantially increased council tax bill. 

Local authorities will have discretion to charge higher council tax premiums on empty domestic properties from 1 April 2019. 
Currently, an authority can charge a council tax premium of up to 50% on homes unoccupied and substantially unfurnished for two years or more. This is in addition to the usual council tax charge for that property. 

From 1 April 2019, local authorities can decide to charge a premium of up to 100% in such circumstances. 

Higher maximum premiums will apply in the future, in cases where a home is unoccupied for longer. From 1 April 2020, the premium is capped at 200% for homes empty for more than five years and from 1 April 2021, it is up to 300% for properties empty for more than ten years.

If you'd like to find out more about the impact of these changes on you or your organisation, please get in touch.

Contributor: Matt Battensby

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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