Thousands of UK start-ups face WeWork tax blow as VOA narrows small business rate relief

Thousands of start-ups and sole traders operating in WeWork-type offices could face higher business rates after the government’s Valuation Office Agency began disqualifying tenants in shared office spaces from Small Business Rate Relief (SBRR). The shift, prompted by a recent legal ruling, could expose thousands of firms to new bills for the first time, campaigners say.

The VOA said it began applying the disqualification in response to a court decision that determined individual rooms in barristers’ chambers were not eligible for SBRR, and that the change could affect up to 4,000 properties initially. Tenants in those spaces may face business rates bills they had not anticipated, even if the spaces are shared across multiple tenants for facilities such as meeting rooms and IT space.

A sole trader in a shared office with a rateable value of about £230,000 spread across 20 tenants could be treated as if each tenant’s portion were a property valued at roughly £11,500. The small-business relief threshold for SBRR remains at £12,000, so those tenants could see their rates bills rise from zero to as much as about £5,750 a year, according to the Federation of Small Businesses (FSB). The FSB estimates the shift could foreshadow broader relief losses for other shared-space tenants, including operators in food halls and market spaces, as the VOA undertakes further reviews in the spring.

The FSB’s policy chair, Tina McKenzie, told reporters the change is a creeping undermining of growth: “This creeping change is really limiting growth among small businesses. This shift in how the VOA works needs to be addressed immediately. We want to work with Government to create a fair business rates framework that makes sure 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.”

The WeWork saga—once valued at tens of billions of pounds and chronicled in media and in the Apple TV docuseries WeWork: Or The Making And Breaking Of A $47 Billion Unicorn—helped popularize coworking spaces. While the company has since been restructured, the regulatory and financial fate of its tenants remains a live issue. The VOA’s review of shared-office relief comes amid similar debates about how to tax increasingly modular workspaces and how to balance relief with broader fiscal pressures.

FSB officials warn the immediate impact could extend beyond 4,000 properties to as many as 150,000 small businesses and sole traders who operate in shared or flexible office environments. The concern is that broader disqualification of SBRR eligibility could drive up operating costs at a time when small firms are already contending with higher costs after last year’s Budget.

Industry and policy observers say the government must resolve the tension between encouraging flexible work and protecting small businesses that rely on rate relief to stay solvent in high-density urban spaces. The Treasury was contacted for comment, but no response was available at publication.

Looking ahead, the Budget on November 26 is expected to address broader business-rate reform and the continuation or modification of Covid-era relief measures. Chancellor Rachel Reeves has signaled a willingness to reallocate relief to target larger shops in a bid to free up funds for small firms, but specifics remain under negotiation. In recent months, Reeves has signaled that the government could ax some Covid-era relief for retail, hospitality, and leisure properties, with relief currently providing 40% relief up to a cap of £110,000 per business in many cases. The objective, officials say, is to reform a system deemed misaligned with contemporary working patterns while preserving support for genuinely small operators.

As Parliament weighs the options, the VOA’s ongoing reviews and possible legislative changes could affect tens of thousands of tenants who rely on SBRR to keep their overheads manageable. The FSB says it remains in discussions with government officials to pursue a framework that keeps shared-space tenants eligible for relief, arguing that doing so would support vibrant local economies and help high streets compete with larger retail centers.

The debate over business rates in the context of WeWork-era real estate, coworking trends, and the broader shift toward flexible workplaces underscores a central tension in modern economic policy: how to reward innovation and entrepreneurship while preserving fairness and predictability in a tax system that directly affects small firms’ viability.