Business Rates – Government listens to PLA


The Government has listened to and, more importantly, embraced the views of the PLA in its Consultation on business rates in multi-occupied properties. As a consequence, the draft Bill has been amended to reflect changes proposed by the PLA. This will ensure that the final enactment will be much clearer and significantly more certain which will be of benefit to ratepayers and practitioners alike.

The draft Bill is known as the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill. Government’s (welcome) aim was the reversal of the ‘Staircasing Tax’ arising from the Supreme Court decision in Woolway (VO) v Mazars LLP [2015] UKSC 53. The consequence of this decision was that contiguous, but not interconnected floors of a building were to be treated as separate hereditaments. This meant that the quantum discount that would otherwise apply to where the two floors were assessed as one unit would not be applicable and consequently, financial alchemy applied to present a ratepayer with a higher business rates bill for exactly the same occupied space.

However, the original draft Bill raised a number of key concerns. In particular, whilst the stated intention of government was for contiguous floors in the same occupation to be treated as one hereditament, the drafting of the Bill was such that it created significant uncertainty in respect of void spaces between floors in a horizontal context or indeed between walls in a vertical context. The PLA highlighted this concern:

CLICK HERE to read the PLA response to the consultation
CLICK HERE to read the Property Week article referencing the PLA

The PLA noted that contiguity based on a shared wall or where a ceiling on one floor was the floor of the above floor would not achieve the stated intention either structurally or legally.

Government has accepted the importance of this concern. In its April 2018 response to the Consultation it amended the draft Bill to reflect concerns that the approach it had adopted was confusing. The contiguity test has been amended in the draft to the extent that the test is satisfied as regards horizontal separation where hereditaments are on consecutive storeys of a building and where some or all of the floor of one hereditament lies directly above all or part of the ceiling of the other hereditament.

The amended draft Bill further confirms that contiguity will not be prevented merely because there is a space between the 2 hereditaments that is not occupied or owned by the occupier of the hereditaments. This has been included to address the concern that voids between floors or parts of a building on the same floor or adjoining separate properties would not be treated as contiguous under the original drafting.

This is significantly clearer than the contiguity test being based on a floor of one unit being the ceiling of the unit beneath it.

The other key amendment in the draft Bill concerns the treatment of unoccupied properties. The revised draft Bill is clear in that where occupied units that would have been treated as one hereditament when occupied will remain as one hereditament if they become unoccupied on the same day and remain in the same ownership.

As at 16 April 2018, the revised draft Bill is at Second Reading stage in the House of Commons. It is anticipated that it will continue on its course to enactment.

The PLA is pleased and encouraged that government has listened to its views and taken action to achieve greater legal clarity which will be of benefit across the industry.


Bryan Johnston
Property Litigation Association