Thousands of start-ups and sole traders working in WeWork-type shared office spaces could soon face new business rates bills following a shake-up that campaigners warn may stifle growth.
The Federation of Small Businesses (FSB) has issued a warning that many firms could be forced to close if vital tax relief is withdrawn. Small Business Rate Relief (SBRR) currently reduces firms’ annual business rates bills, in some cases offering a 100 per cent discount on certain properties.
However, the Valuation Office Agency (VOA) has recently begun disqualifying businesses located in shared office spaces from claiming SBRR. As a result, tenants in up to 4,000 properties may face paying business rates for the first time.
This move follows a legal ruling that individual rooms within barristers’ chambers are not eligible for small business rate relief. For example, a sole trader renting a room in a shared office with a total rateable value of £230,000 — where 20 tenants share facilities such as meeting rooms, IT space, and storage — might previously have been considered to occupy a property with a rateable value of around £11,500. This falls below the £12,000 threshold for SBRR eligibility.
Under the new changes, however, such tenants could see their business rates bills jump from zero to approximately £5,750 annually, according to FSB estimates.
The FSB fears this precedent will lead to thousands more businesses—including those operating in food halls and market spaces—being caught in the tax net as part of a VOA review scheduled for April.
WeWork, a pioneer in shared office spaces, was once valued at $38 billion before its highly publicised collapse—a story chronicled in the documentary *WeWork: Or The Making And Breaking Of A $47 Billion Unicorn*. Although the company has since been rescued, attention is now turning to the impact on its tenants.
The FSB warns that withdrawing relief could directly affect some 150,000 small businesses and sole traders. The organisation has called on the Government to revise the system, especially as small businesses are still grappling with rising costs following last year’s Budget.
FSB Policy Chair Tina McKenzie said:
“This creeping change is really limiting growth among small businesses. This shift in how the VOA operates needs to be addressed immediately. We want to work with Government to create a fair business rates framework that ensures small firms in shared spaces remain eligible for SBRR, a lifeline for many. We need to be providing all the tools available to revitalise and create thriving high streets.”
Business rates—a levy based on the value of commercial property—remain a major point of contention between businesses and Treasury officials. Many are anxiously awaiting announcements from Chancellor Rachel Reeves in the upcoming Budget on November 26.
She is expected to scrap another Covid-era business rates relief for retail, hospitality, and leisure properties, which currently offers 40 per cent relief up to a cash limit of £110,000 per business. The Chancellor is also poised to confirm controversial reforms that will see larger shops taxed more to fund lower bills for smaller firms.
The Treasury has been contacted for comment.
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