Chancellor Rachel Reeves is facing mounting criticism over plans to overhaul business rates in England, with opponents warning the changes amount to a costly “stealth tax” on shared office providers, according to reporting first published by The Telegraph.
The reforms, driven by a shift in how the Valuation Office Agency, VOA, assesses flexible workspaces, are expected to generate close to £600 million a year. However, critics argue the policy places a disproportionate burden on small businesses and entrepreneurs while delivering relatively limited returns to the Treasury.
Under the proposed approach, co-working buildings will be treated as single entities for tax purposes, rather than being assessed as separate units. This change removes access to small business rates relief for many tenants, pushing up overall costs and leaving landlords with significantly higher bills, costs that are widely expected to be passed on.
Estimates from consultancy ChamberlainWalker suggest small firms could face average annual increases of around £5,400, a figure many say is simply unaffordable in the current climate. The firm also warned that up to 150,000 workers could abandon shared office spaces altogether, raising concerns about reduced activity on high streets and in local economies.
Chris Walker, founder of ChamberlainWalker, described the move as one of the most damaging ways the Government could attempt to raise revenue, arguing that any gains would likely be offset by wider economic harm. He suggested the policy risks suppressing business growth and reducing spending in already fragile local economies.
There are already signs of disruption. The Fisheries, a shared workspace in East London, was hit with an unexpected retrospective tax demand of £400,000 following a reassessment, a case that has fuelled fears about the stability of similar operators across the sector.
Business groups have warned that the changes could hit the smallest firms hardest. Micro-businesses, freelancers and sole traders, many of whom rely on co-working spaces as an accessible and flexible alternative to traditional offices, are expected to bear the brunt of the increases.
Paul Wilson, policy director at the Federation of Small Businesses, FSB, said the additional costs could prove decisive for many, forcing them to reconsider whether they can afford to remain in shared workspaces at all. He warned that the policy risks undermining the Government’s stated ambition to support local growth.
Operators have echoed those concerns. Richard Johnson, managing director of UBC, which runs 17 flexible office locations across the UK, said the scale of the increases is far beyond what most tenants could absorb. He pointed out that his clients are typically small, community-focused enterprises, not large corporations with the resources to weather sudden cost increases.
Industry body FlexSA has held multiple meetings with Treasury officials but has yet to secure any changes, while the FSB has urged ministers to intervene before the policy takes full effect.
Despite the growing backlash, the Treasury has defended the reforms, pointing to a broader £4.3 billion support package aimed at limiting business rates increases. Officials also highlighted measures such as maintaining corporation tax at 25 per cent and cutting rates for hospitality, funded in part by higher charges on the most expensive properties.
Critics, however, argue that these measures do little to offset the immediate impact on small firms operating in shared spaces, with some warning that Reeves’s approach risks alienating precisely the businesses the Government claims to support.
