Should your sofa be rated as business premises?

Working from home is increasingly popular. Workers do not have the cost and time of commuting, comfortable in the knowledge that their extra pyjama time doing emails on their sofa is a contribution to saving the planet. Less travel means lower carbon emissions. Whilst this might reduce workforce cohesion and collaboration, the savings on premises costs for employers are significant. Whilst some companies are turning against or resisting this trend there is a seductive efficiency to it. The resulting reduction in demand for traditional workspaces will have long term consequences.  

With reports now suggesting that 30% of activities in 60% of occupations are technically automatable, it is debatable whether businesses need all these people. Mobile working gives rise to supervision and control issues. Some people just are not disciplined enough to do it. Machines and developing AI wouldn’t take ‘sickies’, leave or sleep. Why have the rat race when you can replace it with something the size of a hamster wheel – with a tireless hamster; particularly, when you have to pay so much for the space.

Lower demand for property space would result in falling rents and rates. Business rates are paid by the occupier, tenant or owner even when they are empty. There are few exceptions to this. Landlords could face competing for tenants like commuters do now for train seats.

The rating system is anachronistic. It discourages employment of people who take up space and encourages the alternative – automation leading to human redundancy. But councils rely on this income to provide essential services. It is important to examine where this will be replaced from.

There are usually phases to tax change. Firstly, tax rates increase for the remaining payers. Arguably, this has already started. There has been outrage over increases to business rates. Secondly, taxes are expanded. We may well see a tax on home working (a sofa could be classified as ‘business premises’), or on commuting (most forms of travel are already taxed in some way) or indeed increased tax on technology development (rather than giving tax credits). Thirdly, evolution – change will happen but the need for the tax base will not – if public services are to be maintained. There may have to be conscious choices between funding services if automation decreases the tax base from workers. It is possible we could see ‘pyjama rates’ for working from home or tax on companies making more profits from technology than people. The Government needs to look at whether to tax the companies more who are developing the AI that will be our working nemesis. Or an alternative is to give tax credits for employing people.

We may not mind machines paying our taxes but would not want to compete with R2-D2 for a job. This cannot happen? Uber drivers are reading about driverless cars. Human redundancy will mean lower tax yields from businesses using space for people until we need it again; if we ever do. Until then we are faced with higher personal and corporate taxation to support the tax base.