Small Business Rates Relief is at risk for small businesses in serviced offices through a quiet VOA reclassification. We're running a 3-minute survey to understand how it would affect you.
Small Business Rates Relief (SBRR) is the tax relief that takes the business rates bill to zero for the UK’s smallest firms. It is one of the few tax breaks designed specifically for micro-businesses, and historically it has applied to small businesses in serviced offices the same way it applies anywhere else.
Take the survey →
Small Business Rates Relief (SBRR) is the tax relief that takes the business rates bill to zero for the UK’s smallest firms. It is one of the few tax breaks designed specifically for micro-businesses, and historically it has applied to small businesses in serviced offices the same way it applies anywhere else.
The Valuation Office Agency has now started assessing some serviced offices as a single rateable unit rather than as a collection of separate small offices, and where that happens, the small businesses inside lose access to SBRR.
“In effect, this is a tax rise on small businesses, but because it is being delivered through a technical reclassification rather than a budget measure, it is going largely unnoticed.” Laura Beales, Co-founder, Tally Workspace
It lands at a time when small businesses are already managing higher costs: the FSB reports that a typical small employer with nine staff on the National Living Wage has seen annual costs rise by around £25,850 between January 2025 and April 2026, and Parliament’s Business and Trade Committee has described the pressures facing small businesses as comparable to the pandemic.
The case being made to government on the reclassification has come almost entirely from operators and trade bodies. The small businesses we speak to using serviced offices are largely unaware of the change.
We are running a short, anonymous survey for small businesses and operators to understand whether they are aware of this change and the potential impact it might have.
What’s changing
For years, each small business inside a serviced office has been treated as a separate rateable unit for business rates purposes. Most sat below the threshold, so the businesses inside qualified for SBRR.
Following two recent court decisions, Cardtronics v Sykes and Prosser (VOA) 2024, the VOA has started reclassifying serviced offices as a single hereditament instead. In practice, that means the whole building is treated as one rateable unit and the relief that used to belong to each small business inside falls away significantly putting up costs for the operators.
The same legal reasoning could in time apply to other shared business spaces: markets, shared workshops, food halls, and other settings where a number of small businesses operate under one roof. No formal policy has been announced, but the single-hereditament logic that supports the reclassification of a serviced office building could apply equally elsewhere.
The Federation of Small Businesses describes this as the “shared workspace penalty”: a relief designed for small firms, no longer available to small firms that happen to share a building.
The numbers
Independent economic analysis commissioned by the Flexible Space Association (FlexSA), produced by Chamberlain Walker, puts a sector-wide figure on it. If reclassifications continue, the change adds around £600m a year in additional business rates liability across the sector, an average of £5,400 a year extra for each small business in a serviced office, and up to 150,000 workers potentially pushed back to working from home.
Reclassifications can be backdated to 1 April 2023, so some operators have already received six-figure retrospective bills, including a £400,000 charge to one Midlands provider.
One operator, The Fisheries, has been granted permission to seek a judicial review after the VOA’s reclassification of its building generated a £500,000 backdated bill dating to 2023. Mrs Justice Lang found the operator had raised arguable grounds, and the case is being treated as a test case for the wider sector. The operator argues it has been singled out, with neighbouring competitors not yet facing the same charge.
Why most tenants don’t know about it
There has been no announcement and no clear policy. Compare that with the recent changes to pub rates relief, which came with a Budget announcement and a published per-pub impact.
The serviced office change is being applied through individual VOA assessments, building by building, and where it lands the small businesses inside lose access to SBRR.
That same structure explains why occupiers have not been told. Serviced operators are fighting the change at industry level because, applied at scale, it puts their business model at risk. They have little reason to raise it with tenants until a specific building is affected, since the alternative is starting a conversation about future bill rises that may never arrive.
This is not the same thing as the 2026 business rates revaluation, which is a routine national exercise that updates the rateable value of every commercial property and took effect in April 2026. The reclassification is a specific change in how serviced office buildings are categorised, and it is being applied building by building rather than as a national update or a clear policy change.
Where it stands
The industry’s position has been made clear. FlexSA, the Federation of Small Businesses and the CBI have all raised the issue with the Treasury. FlexSA has had three meetings with the Exchequer Secretary, and more than 60 providers signed an open letter to government in November 2025. A High Court judge has granted one operator the right to a judicial review.
The government has acknowledged the situation. In a recent letter, Chancellor Rachel Reeves confirmed that the VOA had concluded “most serviced offices will need to be assessed as a single property, unless clear evidence demonstrates a need to split”.
The VOA has said it is looking to clarify how case law applies before deciding its approach to the rest of the sector.
No resolution has been reached.
What you can do
We are running the survey to understand how this change could impact small companies, SMEs, startups and scaleups: the businesses that depend most on serviced and shared workspace. The findings, anonymised, will be published to draw attention to the issue.
If you want to go further, write to the MP for the constituency where your workspace is, not your home constituency. The change affects employment and small business activity in their patch, so they have a direct reason to engage. You can find them by entering your office postcode at members.parliament.uk. Tell them what your business does, what losing SBRR would mean in practical terms, and ask whether they will raise it with the Exchequer Secretary to the Treasury.
