The Government is pushing ahead with plans to reverse the controversial “staircase tax” in a move hailed by small business advocates.
Communities Secretary Sajid Javid put forward the draft legislation on Friday just over a month after Chancellor Philip Hammond pledged to change the law, which was the result of a Supreme Court ruling on the definition of a single business space.
If not overturned, offices covering multiple floors in a building would be billed separately if their corridors or staircases are communal, rather than private to the business.
The Federation of Small Businesses (FSB) had warned that the staircase tax would have resulted in some bills being hiked up to 5,000%.
But the Government reversal means that businesses impacted by the Supreme Court ruling will have the option of having their bill recalculated and backdated, including those that have lost small business rate relief.
Mr Javid said: “The ‘staircase tax’ is an unfair rates hike for businesses.
“For years these businesses in adjoining units or rooms received one rates bill, but this ruling meant they now faced multiple bills for operating in an office linked by a communal lift or stairs.
“I am ending this by giving those businesses affected the option of getting their rates bills recalculated and any savings due backdated.”
Alex Probyn, president of ratings advisory firm Altus Group, said the reversal would aid tens of thousands of businesses.
“The Government’s willingness to listen and legislate against what was effectively an unfair and unjust ‘stealth’ tax will now bring comfort and relief to around 80,000 firms.”
It comes after months of industry backlash over the tax, which also faced cross-party criticism from the likes of Tory MP and Treasury Select Committee chair Nicky Morgan, as well as shadow business minister Chi Onwurah and Liberal Democrats leader Sir Vince Cable.
Commenting on the draft legislation, FSB national chairman Mike Cherry said: “The staircase tax has arbitrarily penalised small firms simply because they shared a communal staircase, corridor or even car park with another business.
“It is very good news that the Government has stepped in to repeal this ludicrous tax and I hope politicians of all parties will now back its abolition when it is put to Parliament.
“Senior ministers, including Sajid Javid and Philip Hammond, have taken this decisive action after listening to the concerns raised by FSB and its members.
“We look forward to taking part in the Government’s consultation to make sure this legislation is right and that all small businesses affected are reprieved without delay.”