The Government’s plans to re-introduce the so-called ‘staircase tax’ could have a detrimental impact on local government finances, committee chair warns.

Clive Betts, chair of the Communities and Local Government Committee, has written to the Minister for Local Government Rishi Sunak MP to raise concerns over the draft Non-Domestic Rating (Property in Common Occupation) Bill.

The Bill would allow the Valuation Office Agency (VOA) to revert to how they calculated business rates in multi-occupied properties before 2015.

Under this method of calculation, if a business occupied two adjoining floors of a building or two rooms separated by a wall only, they would only receive one rates bill.

However, if they occupied two rooms on either side of a common corridor or two floors separated by another floor, they would receive two rates bills - hence the unofficial moniker ‘staircase tax’.

Following a Supreme Court ruling in 2015, this method of calculation was dropped, although the Government is now looking to reintroduce it under the Non-Domestic Rating (Property in Common Occupation) Bill.

If this new legislation is agreed, ratepayers would be allowed to apply for reassessment retrospectively back to 2010, leaving the impact on individual local authorities unclear.

As Mr Betts writes: ‘The Government intends to allow ratepayers to apply for reassessment of rateable value retrospectively back to 2010.

‘So, the rate bills for some ratepayers will presumably be reduced. There will be no corresponding increase in the bills of others; there would doubtless be problems retrospectively increasing taxation.’

Mr Betts goes on to note the Government has left the impact this will have on council finances ‘unclear’ and requests Mr Sunak provide some clarity on the issue.