Do You Pay Business Rates on a Serviced Office?

Do You Pay Business Rates on a Serviced Office?

Business rates are one of the most commonly overlooked costs of running an office. For a conventional leased unit they can add a significant amount to your annual bill, and they arrive from the local council on top of rent and service charges.

So when businesses look at serviced offices, one question comes up again and again: do I pay business rates on top?

In most cases, no. But it depends on how the space is let to you. This guide explains how business rates work for serviced offices, when they’re included, when they’re not, and the questions to ask before you sign.

This article is general information, not tax or legal advice. For your specific situation, speak to an accountant or check gov.uk.

What are business rates?

Business rates are a tax on most non-domestic property in England and Wales, including offices. The Valuation Office Agency (VOA) gives each property a rateable value, an estimate of its annual rental value. Your local council then multiplies that value by a national figure called the multiplier to work out your bill. Reliefs may then reduce it.

Normally, the occupier of a property is responsible for paying the rates. That’s why the way a serviced office is let to you matters.

Are business rates included in a serviced office?

With most serviced offices, yes: business rates are included in your monthly fee. Here’s why.

Serviced offices are usually provided under a licence agreement rather than a lease. You get the right to use an office within a building the provider runs, along with shared facilities such as reception, kitchens and meeting rooms. Because the provider stays in control of the building, it’s normally the provider, not you, that’s treated as the occupier for rates purposes. The provider pays the rates and builds them into your all-inclusive price.

At The Serviced Office Company, business rates are included in the monthly fee at all locations. You won’t receive a separate bill from the council.

When might you pay business rates separately?

There are situations where rates may be billed to you, or recharged separately:

• Self-contained suites. If your space has its own entrance and you have exclusive control over it, the VOA may assess it as a separate property with its own rateable value. You could then be liable directly.
• Long or lease-style agreements. Some “managed office” deals look more like a lease. Responsibility for rates may sit with you.
• Providers that itemise. A few providers quote a low headline price and add rates as a separate line. The fee looks cheaper, but the total isn’t.

That’s why it’s worth comparing the total monthly cost, not just the headline rate per desk.

What about Small Business Rate Relief?

If you’re liable for business rates on a small property, you may qualify for Small Business Rate Relief. In England, at the time of writing, properties with a rateable value below £12,000 receive 100% relief, and relief tapers for values between £12,000 and £15,000. Rules usually require you to occupy only one property, and the thresholds can change, so check the current figures on gov.uk.

If your serviced office fee already includes rates, the relief question doesn’t arise for you. The provider handles the building’s liability.

How rates affect the real cost: lease vs serviced office

Rates are one reason a serviced office can work out cheaper than it first appears. The headline price per desk often already includes costs that a leased office would add on top.

Questions to ask before you sign

• Are business rates included in the monthly fee, for the full term?
• Is my office assessed separately by the VOA?
• If rates increase after a revaluation, will my fee change?
• Are there any other costs not included (service charge, utilities, meeting rooms)?
• Can you show me the total monthly cost in writing?

We’re happy to answer all five for any of our offices in Telford, Salford Quays and Canary Wharf.

Frequently asked questions

Do coworking and hot desk members pay business rates?

No. Hot desk and coworking memberships give you use of shared space, not occupation of a property, so rates are the provider’s responsibility.

Does a virtual office mean I pay business rates?

No. A virtual office provides an address and mail handling, not occupied space.

Can I claim the cost of a serviced office as a business expense?

In general, office costs are an allowable business expense, but ask your accountant how this applies to you.

Find an all-inclusive serviced office

With one monthly fee covering rent, rates, utilities, broadband, furniture and a staffed reception, you’ll know exactly what your office costs. Explore our all-inclusive serviced offices in Telford, Salford Quays and Canary Wharf, or contact us for a written quote.