When people talk about coworking spaces being “tax deductible,” they’re referring to whether the cost of using these spaces can be deducted from taxable profits. For businesses and self-employed individuals, anything used “wholly and exclusively” for work purposes may qualify—such as rent, utilities, or membership fees. But how does this apply to coworking?
Tax rules can vary depending on jurisdiction. In the UK, for example, the rules differ depending on whether you’re a registered company or a sole trader. This article will explain these differences, outline key considerations, and share how coworking—as a flexible workspace solution—fits into the picture.
Coworking For Limited Companies
If you operate through a limited company, your business can typically deduct all “allowable” expenses. These include coworking fees, such as desk or office access, meeting-room bookings, and hot-desk drop-ins—so long as they’re strictly for business purposes.
To be deductible, expenses must meet these conditions:
- Purpose: Used solely for business activities. A desk used to run meetings, handle clients, or complete projects counts.
- Documentation: Maintain receipts or invoices in the company’s name, with clear dates and amounts.
- Reasonableness: HMRC expects that costs are sensible in relation to the business’s income and scale—luxury-level memberships might trigger queries.
Once these criteria are met, fees paid to a coworking provider can reduce your company’s taxable profit, potentially lowering your Corporation Tax bill.
Coworking For Sole Traders And Partnerships
Sole traders and partnerships in the UK report expenses directly against their business profits via Self‑Assessment. Many of the same rules apply:
- A coworking membership can be treated as a business expense if it’s used “wholly and exclusively” for your work.
- You must keep evidence of spending—receipts, dates, and business purpose.
- The expense should be proportionate to your turnover and sensible for your trade.
Unlike a fixed office, which may involve capital allowances or lease considerations, coworking fees are usually treated as revenue costs and deducted year-by-year. This makes them a convenient and flexible alternative from a tax perspective.
Dealing With Mixed-Use And Variable Use
What if a coworking space is sometimes used for personal tasks—checking personal email, doing admin, or meeting friends?
- Allocate usage: If you use the space partly for business and partly for personal reasons, only claim the business portion. For example, claim 80% of the cost if that reflects your time.
- Record keeping: Note down how your usage breaks down. HMRC doesn’t require a week-by-week log, but consistent records are wise.
- Meeting rooms and additional services: These are usually fully deductible when used for business. Just treat them like any other business expense.
Coworking vs Home Office
Many people working from home try to claim household costs like utilities, mortgage interest, or internet. Coworking memberships offer clarity:
- Fixed fees: Coworking bills tend to be clear-cut and avoid home-office apportionment.
- Shared costs: Coworking providers, like Colony, allocate utilities, rent, and facilities among users, so you don’t need to guess a percentage for home usage.
- Less scrutiny: HMRC often applies caution to home‑office claims. In contrast, coworking memberships are generally seen as genuine business expenses, particularly if they provide business infrastructure like meeting rooms and internet.
Colony As an Example of a Coworking Environment
To see how this plays out in practice, consider a coworking provider like Colony, which has locations across Manchester. Colony offers flexible access to:
- Hot desks, booked hourly or daily
- Dedicated desks and private offices, with monthly membership
- Meeting rooms, kitchens, and breakout areas
If you use Colony for business meetings, focused work, or client interactions, your fees are likely fully deductible. You simply need invoices in your name or company name, showing the charges and dates.
Even if you sometimes use the space casually—say, for a personal video call—keeping a log of when you’re working on business tasks versus personal ones helps allocate deductible costs correctly.
Other Tax Considerations
Here are some additional points to bear in mind:
- VAT
If the coworking provider is VAT-registered, you may be able to reclaim the VAT if you’re also VAT-registered. If not, you’ll pay VAT as part of the fee. - Pension or payroll
If membership is paid through your limited company (not via salary), HMRC typically treats this as a legitimate business expense. Just be sure it’s properly recorded. - Capital allowances
Coworking memberships are treated as revenue expenses—meaning you deduct them in the year incurred. Large upfront investments (e.g. building fit-out) would fall under capital allowances, but monthly or pay-as-you-go coworking does not. - Shared membership
If you share a coworking membership with a spouse or friend and only one of you uses it for business, only that person’s share is deductible.
Summarising Key Points
| Situation | Tax treatment |
| Limited company | Claim full coworking fees if wholly for business |
| Sole trader/partnership | Claim fees used exclusively for work, keep records |
| Mixed-use | Allocate proportionally (e.g. 70% business use) |
| Home office vs coworking | Coworking often simpler, cleaner deductions |
| VAT | Can reclaim if provider and you are VAT-registered |
| Payment method | Business- or company-paid memberships are preferred |
| Shared memberships | Only the business user can claim their share |
Making Coworking Tax-Efficient
Here are some practical tips:
- Always get invoices or receipts in the correct name—your business or personal.
- Note the purpose—“meeting with client,” “focused project work,” etc.
- Split costs if using the space for personal reasons.
- Understand VAT implications if you’re registered.
- Keep a simple log when mixing personal and business use.
Final Thoughts
In summary, coworking memberships—including flexible setups like hot desks, dedicated spaces, or meeting rooms—are typically tax deductible for businesses, sole traders, and partnerships in the UK, as long as they’re used mainly for work and properly documented.
Services like Colony are prime examples of coworking providers whose fees are tax-deductible when used for business. While claiming business expenses always requires care, coworking offers a clear, flexible, and HMRC‑friendly approach to creating a work environment without the complications of running or claiming from a home office.
