Coworkers who rent flexible shared office space across Gloucestershire – and the landlords who provide their space – are eyeing a potential seismic shift on rateable value.

The Federation of Small Businesses has issued a warning that, further to a recent legal ruling, the Valuation Office Agency (VOA) has begun to disqualify firms in shared office space from Small Business Rates Relief (SBRR).

With all eyes on the Autumn Budget, any change to SBRR could leave more than 150,000 SMEs and sole traders in coworking locations exposed to a new cost, with some operators being at risk of a blindside bill of many thousand pounds a year.

With Chancellor Rachel Reeves on an inevitable quest to hunt down revenue to balance the books, the coworking sector, now a vital element in Gloucestershire's economy, has seen attractive growth.

Q3 2024 analysis indicates that there were more than 3,300 such spaces operating for business across the UK and Ireland, which equated to around twice the allocation per capita found in the USA.

Here in Gloucestershire, and backed by the momentum of the county's Growth Hub network, the pragmatic work trend has grown markedly since Covid, with the network providing free startup support, as well as coworking facilities across the county.

Newcomers such as hospitality-led Cowork and Country, in Cheltenham, provide a network of luxury, flexible workspaces while the arrival of Patch, as the second tenant to Gloucester's £107m Forum, underlines this vital direction of travel for the county's ecosystem.

Engagement in shared space has risen significantly since the Pandemic, the North American commercial listing giant Coworking Café found in its latest research, with sole traders, small startups and SMEs seeking smarter and more flexible means to minimise outlay, boost their productivity and bolster their profit margins.

But a report earlier this week on a potential shift of the goalposts for business rates, as reported by This is Money, cites an example of sole traders in a shared building with an overall rateable value of £230,000. If this space were used by 20 tenants sharing such benefits as meeting rooms, IT space and storage, the paper warned that the rate bill for each occupant would equate to a rateable value of £11,500.

Tina McKenzie, FSB policy chair, warned that the flexible work sector was witnessing a "creeping change" and that an apparent shift in the way the VOA worked merited urgent attention.

She said: '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."'

The FSB added that, as a means of taxation, the calculation of business rates on the value of a commercial property were now high on its agenda for discussion with the Chancellor ahead of the Autumn Budget, on November 26.

The current financial balance for anyone who takes on a serviced office or shared workspace sees the landlord pay the business rates for the entire building, with this cost effectively passed on as an increment of the monthly access fee within any all-in deal that the tenant holds.

But a chartered surveyor and significant stakeholder in Gloucestershire's coworking sector has told Punchline-Gloucester.com that any expectation of imminent change should be viewed in context with the specifics of what has happened so far.

Patrick Downes, who runs the property investment consultancy Trust in Property, in Tewkesbury, and guides boardrooms on best strategy, said he did not fear any imminent change.

Mr Downes said: "Putting this into context, the trigger of the concern is the recent legal ruling in a case where individual barristers, who collectively formed a barrister's chambers, considered they should be treated separately for the office they each occupied.

"Each had their own room and it was claimed they should be assessed for Rates on their room, and not a share of the whole office suite they were occupying as their chambers."

This claim was ruled to be incorrect, he added, because the barristers were working within their own legal structure, with a collective identity, while sharing administrative and clerking services in their chambers.

He added: "The reality of co-working seems to be quite different because a group of co-workers in one suite or building (individuals or even small businesses) seem to be the opposite of the case. They are not working within one legal structure as they are all different; they do not have a collective business identity or common purpose; and they do not share support services, just the facilities."

Any further "creeping change" voiced by the FSB, he said, would necessitate a significant degree more of policy change, while tough questions would remain over how such change might be administered if it were brought in.