Serviced Office Operators Warn of Devastating Property Tax Changes Threatening Small Businesses
Serviced office operators across the UK are sounding the alarm over recent changes to business rates, warning that thousands of small businesses could be pushed to the brink. The Valuation Office Agency (VOA) has begun treating flexible workspaces as single properties for rating purposes, a move operators argue is unfair, lacks consultation, and could lead to massive, backdated tax bills.
Key Takeaways
- Serviced office operators face significantly higher business rates due to a reclassification by the VOA.
- Small businesses occupying these spaces may lose eligibility for crucial tax reliefs.
- Operators warn of potential business closures and job losses across the UK.
- Some bills are reportedly being backdated, with amounts reaching up to £400,000.
A Shift in Business Rates Calculation
More than 60 leading operators of serviced offices, business centres, and co-working spaces have penned a letter to Chancellor Rachel Reeves expressing “urgent and deeply serious concern.” The core of their grievance lies with a significant change implemented by the Valuation Office Agency (VOA). Previously, individual units within flexible workspaces were assessed separately for business rates. However, the VOA has now begun treating these entire flexible workspaces as single properties for rating purposes.
This reclassification means that operators and their tenants face substantially increased bills. Crucially, tenants can no longer claim vital reliefs such as small business rates relief, which many rely on to remain viable. The operators contend that this change has been introduced without prior consultation and, in some instances, is being applied retroactively, leading to potentially crippling backdated bills.
Financial Ramifications and Sector Jeopardy
Jane Sartin, executive director of the Flexible Space Association (FlexSA), highlighted the severity of the situation, stating that the sudden reclassification is “already putting the future of many workspaces in jeopardy.” She estimates that over 150,000 small and medium-sized enterprises (SMEs) are losing the reliefs they depend on, with many centres now “on the brink.”
Operators warn that if they manage to survive, they may be forced to pass these increased costs directly onto the small businesses they host. This would exacerbate the existing financial pressures on SMEs already grappling with rising taxes, inflation, and energy costs. The VOA has reportedly refused to offer guidance or clarity on its new approach, adding to the sector’s uncertainty despite high demand for flexible workspace.
Legal Basis and Industry Concerns
The VOA asserts that the change is a result of developments in case law, citing rulings such as Prosser v Ricketts (2024), Cardtronics v Sykes (2020), and Ludgate House v Ricketts (2019). However, operators argue that these rulings do not apply to serviced offices and accuse the VOA of enacting sweeping policy changes through valuation practices rather than formal legislation. Industry bodies, including the National Enterprise Network, warn that these changes could “trigger widespread business failures” and undermine entrepreneurial activity, particularly as the sector is still recovering from the pandemic.
Calls for Intervention
Industry experts like Tim Attridge, head of UK rating at CBRE, describe the business rates system as outdated and ill-equipped for the modern economy. He suggests the VOA should halt such changes until the valuation basis is properly established through litigation. Operators are urging the Chancellor to intervene to prevent widespread closures and protect a sector that is a vital support system for hundreds of thousands of small businesses across the country.
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The Moveandstay editorial team writes about serviced living, workspaces, and city guides across Asia-Pacific.
