TOUCHING THE VOID – Mazars Revisited

Not many outside the business rates bubble will have been following the twists and turns of the Mazars case and its aftermath.  Stripping away the jargon, the Supreme Court decided that each floor in a multi-occupied building should be subject to a separate rates bill even where immediately above or below another floor occupied by the same entity, unless linked by a private staircase or lift.  This is of relevance because especially large floors enjoy a discount, which only applies if all floors occupied by the entity in the building are taken into account.

The Government surprised the rating world by announcing in the Autumn 2017 Budget that legislation would be introduced to restore the practice of the Valuation Office (responsible for setting the rateable values of commercial properties) prior to the Supreme Court decision.

After a consultation process the draft bill has now been published.  In short, once it becomes law (intended to be before the end of the current session of Parliament) floors will be treated as one provided they are occupied (or, if vacant, were last occupied) by the same entity and are "contiguous".  Contiguous means they either touch or are separated only by a void (e.g. a raised floor accommodating landlord's services).

Most importantly, the Act will apply retrospectively with effect from 1 April 2010, enabling ratepayers to undo the mischief resulting from an over-zealous application of the Supreme Court decision by the Valuation Office, in some cases prompted by local authorities anxious to share in the additional rates income generated by treating each floor as separate for rating purposes.

This measure will put a halt to the practice of installing interlinking staircases or taking leases of common parts, solely to avoid additional rates liability.  A classic case of the tail wagging the dog…

Author: Martin Dawbney, Partner, Real Estate, London

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