In Woolway v Mazars the Supreme Court concluded that a ‘hereditament’ is â€œa self-contained piece of property, namely all parts of which are physically accessible from all other parts, without having to go onto other property. Where premises consist of two self-contained pieces of property it would require relatively exceptional facts before they could be treated as a single hereditament. The mere fact that each property may have the same occupier should, normally, make no difference.â€
The ruling means that a business operating from different rooms or floors in a multi-tenanted office building would be classed as a separate hereditament and therefore liable to pay individual rate bills on each area that was divided by a communal staircase or corridor. If the business areas are linked by private a staircase or walkways, this would not apply.
The amendment means that some businesses will also lose their 100% small business rate relief which is only available to companies with a single property.
The changes have been backdated to April 2010 in Wales and April 2015 in England. Thousands of businesses are likely to be affected and those that do not comply may face prosecution.
Larger businesses that occupy an entire building or access different floors via private staircases are exempt from the tax, while it is estimated that 30,000 small and medium-sized enterprises (SMEs) will be affected by the increase.
The tax will have to be paid retrospectively, even for the period some businesses qualified for business rate relief because the rental value of their property was less than Â£12,000.
National Chairman of the Federation of Small Businesses, Mike Cherry, said: â€œThis latest twist in the business rates tale serves as yet another reminder of what a regressive system our entrepreneurs are faced with when it comes to this tax.Â How can it be right that youâ€™re hit with a massively inflated bill simply because the staircase you use is shared and not private? And these bills are backdated, stinging firms that are still waiting on delivery of relief measures announced more than five months ago.â€
It seems likely the tax will be backdated for company parking spaces, as the Valuation Office Agency (VOA) which calculates business rates for HMRC also considers car parks to be a separate hereditament for rating purposes.
It will be small consolation to those businesses affected that the VOA has itself been nominally hit by the tax. The organisation is facing a Â£100,000 bill as it operates from four floors in Halifax, four floors in Manchester, three floors in Huddersfield and two floors in Crewe. As this is our money being paid from one arm of government to the other, the collection and administration of this tax just costs us more money; another example of the system’s waste!
Contact PropertySurveying.co.uk for advice on all property matters.