"The VO's behaviour has been arbitrary, outrageous and often contradictory. It does not follow new case law, despite its claims to the contrary."
- John Webber - Colliers
A London co-working space has been granted permission to apply for a judicial review of a £500,000 backdated business rates bill, in a case that could set a precedent for the wider serviced office sector and affect thousands of small businesses.
Hugo Warner, co-founder of the Fisheries London Limited, a workspace in Hackney, East London, believes his business has been singled out with what he describes as an "illegal" additional tax charge dating back to 2023 — a bill the company says it cannot pay.
The figure represents a 150% increase on the rates already being paid. Warner has warned that being forced to meet the backdated demand would render the business insolvent and push it into administration.
When granting permission, Mrs Justice Lang DBE stated that "the Claimant has raised arguable grounds which merit consideration at a full hearing." The review was granted on all grounds.
At the centre of the dispute is a decision by HMRC's Valuation Office (VO) to reassess the Fisheries' shared office building as a single establishment, rather than as separate units.
John Webber, head of business rates at Colliers, which is advising the Fisheries, explains that when properties are charged as individual units, tenants can claim small business rates relief, with the building operator handling administration of the tax. That has been standard industry practice for years.
Over the past year, however, the VO has moved towards assessing serviced offices as a single property, placing the entire rates liability on the operator rather than distributing it across occupiers. In some cases, that reassessment has been backdated to 2023, the start of the current rating list.
Warner says his nearby competitors are not facing equivalent bills, placing him at a commercial disadvantage. Industry observers believe the shift in approach reflects Treasury pressure to generate additional revenue from business rates.
Chancellor Rachel Reeves addressed the matter in a letter to Warner's MP, Dame Meg Hillier. She defended the VO's position, writing that the agency had concluded that "most serviced offices will need to be assessed as a single property, unless clear evidence demonstrates a need to split."
Decisions were being made on a "case-by-case basis," she added, but the agency was looking to "clarify the application of case law on serviced offices" before considering "its approach to the rest of the sector."
Reeves also argued that applying a single rating to the operator would mean small and microbusinesses inside the building "face no business rates at all." Critics dispute that framing. Webber says operators would inevitably pass any increased costs on to their tenants.
"It's effectively a tax on small and microbusinesses," said Webber. "And for many it could just be too much."
He was pointed in his assessment of the VO's conduct. "The VO's behaviour has been arbitrary, outrageous and often contradictory. It does not follow new case law, despite its claims to the contrary."
"It is just trying to justify its new policy by picking on one small company, which it thinks it won't be able to fight back."
The case has prompted fears across the flex space industry that the VO's approach could be applied more broadly. "We believe this is a Treasury bid to raise extra revenue."
Webber added. "If it is successful, the government could consider rolling this damaging policy out against the serviced office sector more widely, which would be a massive hit to providers of flex space, to small businesses and to the economy as a whole. It would be a mad thing to do, particularly in the current economic climate."
"We are delighted that the Honourable Mrs Justice Lang DBE has granted our client permission to apply for judicial review on all grounds, and we will be fighting this unfair tax all the way."
