WeWork office firm taps tax rebates meant for small tenants

By Jack Sidders

WeWork, the office space firm which has grown into a global giant in nine years and has a big presence here, is claiming tax breaks in the UK intended for small business. The New York-based company that revolutionised the commercial property business estimates it has received about £2m (€2.2m) in such refunds on £100m since setting up in the UK.

The rebate is likely to rise in coming years due to changes in the British tax system. Its tenants pay a flat rate that includes upfront property-tax payments. That means WeWork gets the tax relief. “WeWork’s offering provides a holistic solution for businesses that includes paying business rates on behalf of members in the UK,” a spokeswoman said.

“Much in the same way that a WeWork membership includes access to work and meeting spaces, wireless internet, events, and other amenities, the payment of business rates and any associated relief we may receive is built into our model,” she said.

While the sum is a pittance compared to the $3bn-plus (€2.7bn) of losses WeWork has posted since 2015, the rebate highlights how new-economy companies are confounding governments at all levels. WeWork, whose parent aims to raise more than $3bn in an initial public offering of its shares, represents the most extreme example of how flexible-office operators have frustrated the intent of small-business commercial property tax breaks in the UK.

The company has become the largest private-sector occupier of office space in London less than six years after arriving. Its UK business had revenue of £118.3m in 2017 out of a worldwide total of $886m, the unit’s most recent accounts show.

“I can’t believe that whoever dreamed up the small-business rates relief was remotely thinking about the serviced office sector,” says Steve Hile at property consultant Gerald Eve. “There is a huge amount being paid out that really should not be paid out because it is not going where it should have gone,” she said. WeWork divides each of its properties into dozens or even hundreds of individual areas.

“Each of those spaces, known as hereditaments, is then separately assessed for tax purposes. While the practice is commonplace among flexible office operators, WeWork carves its space into much smaller parcels than its biggest competitors, according to consultancy Whythawk. A single WeWork site at 1 Fore Street in the City of London, spread over eight floors, contains about 800 separate hereditaments.

Bloomberg