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Serviced Offices – The End Of Business Rate Relief?

With most employers now allowing a flexible working regime, serviced offices have become an increasingly popular office-based solution for businesses in the post-pandemic period.

As a result, serviced offices or workspaces have become an attractive alternative occupation model for landlords to the fixed lease, and there has been an increase in lease and management contract arrangements with serviced office providers.

However, the Valuation Office Agency (VOA) have hit serviced office operators with unexpected large increases (as much as three times) in their business rates bills, following the judgments given in the Cardtronics and Ludgate House cases*.

Historically, small businesses occupying serviced offices have been assessed for business rates in respect of their space only, and so usually had the ability to claim small business rate relief.

The VOA’s change in policy is to assess business rates on the serviced office space/workspace as a whole, and therefore on the provider, not the individual occupied areas.

Rating agents were due to meet with the VOA on 30 November to discuss these changes, and it is not yet known if a reversal in the policy change will result. If not, the changes could be have a significant impact of the costs of serviced office provision.

*Cardtronics case – the Supreme Court held that ATM’s in supermarkets should not be entered as in separate rateable occupation.

Ludgate House case – the Court of Appeal considered a case where ‘property guardians’ were living in an office block, holding that they were not in rateable occupation of their individual rooms.

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