Business groups have raised concerns about changes in the business rates system that could significantly increase the tax burden on shared office and managed workspace providers across the UK.
Under changes to the Valuation Office Agency (VOA), serviced and co-working office buildings are treated as a single hereditament rather than multiple separately assessed units. This means individual occupiers are no longer able to access small business rates relief and workspaces could be forced to pass on the increased costs to tenants.
ChamberlainWalker Economics said that the move will increase business rates liability by £600 million nationally, potentially costing each small businesses over £5,000 a year on average.
It warned some small firms will likely downscale their flexible workspace presence and shift more workers to working from home. The sector supports an estimated 1.75 million jobs and 150,000 could be directly exposed to the change.
The National Enterprise Network (NEN) said many managed workspace providers are not commercial landlords but community organisations that provide “vital frontline services” including start-up advice, mentoring, support for disadvantaged groups and affordable premises for micro businesses and sole traders.
NEN chairman Alex Till said:
“Let us be clear: this is not about large commercial landlords. These changes risk penalising community-based organisations that reinvest every pound they generate into local jobs, enterprise and opportunity.
“If government is serious about growth, it must protect, not undermine the infrastructure that enables people to start and sustain businesses.
“We believe these impacts may be unintended, but without urgent clarification, the consequences for the sector could be severe.
“You cannot tax community enterprise infrastructure out of existence and then ask why growth has stalled.”