for anyone who works from home
to legal requirements for home-based businesses
starting a business?
working from home?
did you know? running a home business?
❚❚ Using part of your home
for work could make you
liable for business rates
all you need to know
to ensure you are
❚❚ Health and Safety laws
apply to anyone who
works from home
❚❚ Most buildings and contents
insurance policies do not
cover home businesses
❚❚ Anyone who works from
home needs to inform their
landlord or mortgage lender
❚❚ The Local Council
needs to give approval Available Free of Charge for
Home Business Network members from
Using❚part❚of❚your❚home❚for❚ A study of 100sq ft, for example,
work❚could❚make❚you❚liable❚for❚ in an area where office space rents
business❚rates. for £12 per sq ft, would have a rent
value of £1,200, and the person
If you work from home you may running a business from home
have to pay business rates, but each would be liable to pay £500 to £600
case is considered on its own merits. business rates – but with lots of
Normally a member of Valuation other adjustments and a possible
Office Agency (VOA) staff will want reduction in their council tax.
to visit your property to check
the facts before an assessment is Declaring that the study is wholly
made for non-domestic rates. You and exclusively used for business
are meant to contact the Valuation could lead to long term problems,
Officer responsible for your area however, if you own the property.
– but it is unclear how many home When you sell your home, there is no
businesses do so. liability for Capital Gains Tax (CGT),
provided that it is your ‘principal,
According to the VOA website, “If private residence’. But if a room
you work at or from home, the part is for business use only, then you
of the property used for work may would be liable for CGT for that part
be liable to business rates (also of the property. If the VOA inspector
known as non-domestic rates) while was to have noted, however, that
the remainder of the property will 5% of the use of that room was for
continue to be liable to council tax domestic purposes, risks of CGT
(although an alteration may be made liability are sharply reduced.
to its banding).
“To decide whether or not part of
your property should be liable to
business rates there are a number examples
of things we have to consider,
including the extent and frequency
of the non-domestic (business) use Go to the relevant section on
of the room (or rooms) and any the VOA website www.voa.
modifications made to the property gov.uk/council_tax/working_
to accommodate that use. Each case from_home.htm.
is considered on its own merits, and
normally we will visit your property to Though there are no specific
check the facts before an assessment rules to examine, the site
is made for non-domestic rates.” does includes examples, such
of those Crown copyright
So you should invite a VOA inspector examples on the next page, of
to your home and ask them to assess working at or from home and
the business area. They will calculate their effects upon council tax
the value of the room or area if it was and business rate liability.
put up for rent as business premises.
The rates payable differ between
areas, but are typically just under
half the rent value.
Example One: Self-employed Example Two: Doctor working The remainder of the week the
doctor attends surgeries at the main
Solicitor working from home from home premises, and in the afternoons he
makes house calls. Other than for
A detached Edwardian house A doctor uses a room in his house as
consultations the room is often
in a residential area owned and a consulting room three days a week.
unused, but when friends come to
occupied by a self employed solicitor The main practice surgery is situated
stay it can be pressed into use as a
who practices from the property, some three miles away near the town
spare bedroom. At weekends and
specialising in matrimonial law. The centre. The house is more convenient
some evenings the doctor uses the
front room on the ground floor is for patients who live locally.
room to read professional papers
furnished with sofa and comfortable
or watch a portable TV away from
chairs, has a TV set and ornaments/ A concrete ramp has been added to
photos of a personal nature are the front door and the door opening
displayed around the room. It is used to the hall and the consulting room
VOA❚assessment: The principal use
on an occasional basis as a waiting has been widened to accommodate
of this room is as a doctor’s surgery,
room for clients during week days, a wheelchair. No one in the doctor’s
and occasional use for domestic
and as the lounge by the occupier family is disabled.
purposes is minor. The room should
during evenings and weekends.
be separately assessed for business
In the room itself there is an
rates, and the remainder of the
The former dining room is used as examination couch which is essentially
dwelling banded for council tax.
an office equipped with computer, a single bed with a cotton sheet thrown
dedicated fax and telephone line, over it. A paper sheet is added and
filing cabinets, desk and shelving removed after use by each patient.
stocked with law books. No domestic There is no office desk as such but
use is made of this room. It is used there is a computer, table and chair in
by a part time secretary when a corner of the room, which are used
the solicitor is visiting clients or by the doctor during his consultations.
No patient records are held at the
The ground floor kitchen is used for house, nor are there any medicines.
preparation of family meals, but also Basic medical equipment is kept in
to make tea or coffee for clients. the doctor’s medical bag or stored in
The first floor accommodation of a drawer after use.
bedroom and bathroom is wholly
used for domestic purposes. There is planning consent for use
as a branch surgery and part of the
VOA❚assessment:❚The office is front garden has been surfaced to
the only non-domestic part and accommodate two or three extra
will be assessed for business rates. private vehicles. There are parking
The principal purpose of the front restrictions in the street.
room is to serve as a lounge. In this
instance, the non domestic use is On the walls of the consulting room
sufficiently minimal so as not to the doctor has attached pictures
warrant assessment for business painted by his young children, and
rates. The lounge and the remainder there are toys in the corner of the
of the dwelling will be banded for room which belong to his children but
council tax purposes. can be played with by young patients.
There is a brass sign outside the front
door to advertise surgery hours.
health and safety
Health❚and❚Safety❚laws❚apply❚to❚ This summarises possible hazards
anyone❚who❚works❚from❚home. such as electrical appliances,
loads, noise, trips, fire and even
There are many myths about psychological hazards such as
Health and Safety legislation. It stress or loneliness. You should
is wrongly blamed by everyone evaluate whether such hazards are
from paranoid teachers to silly significant and – if so – whether
shop staff for all sorts of half-
witted guidance. But here is a
enough precautions have been
taken to minimise the risk. The five
fact: anyone using their home steps to a health and safety risk
as a business workplace must assessment are:
From a health and safety
carry out a health and safety risk
point of view, the area used
assessment to identify any possible 1. Identify any hazards.
for work should ideally be
hazards to themselves, co-workers,
2. Decide who might be harmed completely separate from the
visitors and other members of
and how. rest of the home. A spare room
3. Assess the risks and remove with a door that locks or an
them or, otherwise, reduce them outbuilding such as a garage or
That’s right. Anyone who works from
as far as is reasonably possible. shed is best, so that:
home is subject to the Health and
Safety at Work Act 1974. There is ❚ ❚ Work equipment won’t
4. Record your findings.
no need for a formal, written risk be a risk to members of
assessment for any business with 5. Check the risks regularly and the household
less than five employees, but that take further steps if needed.
❚❚ Risk of accidental damage
does not mean that you are free
You don’t have to write down the to work or equipment will
from legal obligations.
results of your health and safety risk be reduced
assessment unless you employ five
Indeed, if a visitor to your home was ❚❚ Clients can be dealt with in
or more people.
to hurt themselves by tripping over a professional manner
a work-related parcel or one of your
❚❚ Home and business life can
children’s friends was to bump into
be kept separate and distinct
a filing cabinet used for work, you
could theoretically be sued. In an If this is not possible, then
increasingly litigious culture, it is a it is advised to house your
risk that you do not want to run. workstation or equipment in a
The Health and Safety Executive cupboard or area that can be
publishes a pamphlet entitled locked away.
Homeworking: Guidance for
employer and employees on health It will also ensure you don’t have
and safety. To read this go to: www. any possible liability to capital
hse.gov.uk/pubns/indg226.pdf. gains tax (see ‘Business Rates’).
The other useful source is the
Business Link website where the key
information can be found at: www.
businesslink.gov.uk under Home
Health, safety, premises Choosing
and managing your premises Use
your home as a workplace.
Few home business owners give
much thought to the rules and
regulations they have to follow. But
operating without the necessary
licences could result in the business
being shut down or worse, the owner
Whether you need to be licensed will
depend mainly on what it is you do.
Few would be surprised to learn that
tattoo parlours and gambling and
drinking establishments require local
authority regulation. But what about
nursing agencies or hairdressers?
According to Business Link, as a
rule, those looking to work with
food, animals, children and in the
medical sector will need a licence.
That includes a wide range from child
minding, body piercing and catteries
to bed and breakfasts and brewing.
Here are few more home-based
activities that will require a local
authority licence: acupuncture, skin
piercing, tattooists and electrolysis,
butchers shops, chaperones, credit
licences, explosives and fireworks
and non-medicinal poisons. And if you
plan to trade on a Sunday, you will
probably require a licence to do so.
As licences are granted by a local
authority, that is the place to seek
further advice and guidance.
Unglamorous❚it❚may❚be,❚but❚business❚ the terms and conditions as additions
insurance❚is❚essential❚for❚all❚small❚ to your policy may be required.
from❚home❚or❚an❚office. If your work involves any interaction
with the public or if they are likely to
In essence, insurance for small visit your home you should consider
businesses can be separated into public liability insurance. In an age of
cover you’re legally obliged to have increasing litigation, it is important
and cover that is optional. Many to protect against any damage that
business owners operating from home may be done to the public in the
aren’t aware of the cover they legally course of your work.
require once they start using their
home for more than leisure time. Something that many home
businesses forget is car insurance.
Boiling it down to absolute basics, Many standard policies cover
there are two types of essential commuting but no other business
cover for business: employer’s activity, so you need to ensure
liability and professional indemnity. business use is included
The former is legally required for
any business which employs any The list of possible insurance
staff (including part time) to protect requirements is potentially long.
the company from any injury they Ultimately, home businesses need
may sustain as a result of their work. to do a thorough risk assessment to
The latter is not a legal requirement, decide what cover is essential and
but it is essential cover for all what fits their budget. But in terms
consultancy-based businesses as it of best practice:
protects from any claims made as a
result of any advice you give. ❚❚ Many home businesses get
caught out on something as
Updating your policy as the business trivial as not changing the car
grows is critical. For example, insurance policy.
temporary workers and sub-contractors
❚❚ There are some 2.8m businesses
must be covered under employers’
run from home in the UK, many
liability insurance – businesses risk fines
of whom hold stock on the
of £2,500 a day for failing to have this
premises. If there was some
cover in place. Similarly many people
sort of accident such as a
who have started a home business
flood or fire it could seriously
do not realise that, even if their
impact upon the business. Home
current role doesn’t seem to require
businesses should seriously
professional indemnity insurance, they
consider business interruption
may still need retroactive cover to
insurance for these instances.
protect themselves from claims relating
to past activities. ❚❚ Packages/suites of business
insurance products are available
Home businesses also have to review for home businesses which can
existing policies. For example, most be tailored to factor everything
buildings and contents insurance dependant on risk and budget.
policies will not cover home Make sure you shop about for
businesses. Before beginning, check the best deal for your business.
insurance checklist insurance❚cover❚to❚protect❚
Businesses working from a Direct Line for Business surveyed
home address need to consider nearly 900 home-based business
a variety of insurances: owners and found more than a
quarter (28%) had no commercial
Buildings❚and❚Contents insurance cover. Only 12% of those
Check with your provider to surveyed would be protected if
ensure they know you work from their business was unable to trade
home. If they don’t your home and temporarily and only 32% have
its contents may not be covered. public liability insurance.
Motor Kate Syred, head of Direct Line
Ensure you are covered for for Business, said: “With so few
business travel. businesses being protected from
a liability claim or an unexpected
Public❚and❚Products❚Liability pause in trading, this research
To cover injury to customers, highlights the need for business
suppliers, visitors and loss or owners to think about specific
damage to their property. business insurance. Without it,
dreams of being a business owner
Employers❚Liability could quickly become a nightmare.”
Covering injury to persons
employed including casual workers. Direct Line also pointed out that
many business owners based at
Professional❚Liability – home incorrectly think that their
Protecting you against claims normal home insurance covers
of professional negligence. them in the event of a claim for
their business. Research found that
Business❚Interruption 82% of home business owners have
Covering against flooding, power home contents insurance but only
failure or something which 34% have office contents cover.
would affect the running of your Only 18% are covered for the loss of
business and profits lost while their tools, mobiles and equipment.
unable to trade from premises.
Should clients enter your
mortgages, tenancy agreements and covenants
Apart❚from❚planning❚consent,❚ If you use the whole of the property
local❚authority❚licenses,❚specific❚ which you rented as your home for
business❚insurance,❚a❚different❚ business purposes and no longer live
rating❚system❚and❚legalisation❚ there, you will lose any security of
covering❚health❚and❚safety❚there❚is❚ tenure you had and could be evicted
one❚other❚aspect❚that❚home-based❚ by the landlord.
which❚is❚often❚overlooked. You can use part of the home for
business purposes as long as it is not
Houses were built first and foremost specifically forbidden in the tenancy
to be lived in. So many of those with agreement and it does not cause a
a vested interest in that domestic nuisance to neighbours. As a private
dwelling may have a right to object tenant you should not, however,
or even block any plans for a use the home for business purposes
business based there. without your landlord’s permission
because, even if you have a legal
If the home is rented, the landlord right to do so, your landlord may be
may not allow businesses to be able to find some other reason for
run from the premises. This may eviction, if they do not approve.
be because their own insurance
precludes it, or because such a move Covenants
would impact on their ability to rent
out other properties. Covenants are clauses in the lease
requiring the tenant (or landlord)
The property deeds may have to do something or to refrain from
clauses that forbid certain practices, doing something.
Again, these are often imposed to
protect others’ interests. A land For example, a covenant in a
owner who sells part of his plot for shop lease may specify that only
a new house to be built may impose a particular type of trade may be
a covenant to stop a conservatory carried out at the premises.
being added, for example, as it could
obscure his view or encroach on “Covenants restricting what a
their boundary. landowner can do with his property
are extremely common. They
Finally, if the home is being bought are imposed by a landowner who
on a mortgage, the lender may is selling off part of his land, in
have inserted a clause concerning order to protect the value of the
home working. land he retains. Nearly every new
house on an estate will be subject
Tenancy agreements and leases to such covenants,” says Philip
Beckerlegge, partner of the City law
According to the Citizens Advice firm Speechly Bircham.
Bureau, a first port of call for many
with a tenancy dispute, using a
rented home to run a business could
end up with eviction.
If you are buying a home on a
mortgage, and plan to start a
business, you must tell the lender.
The reason is simple, says Bernard
Clarke from the Council of Mortgage
Lenders. “They will want to know
what the business is, what the home
will be used for and, critically, how
much of the home is being used –
the proportion of the home involved.
Residential mortgage providers are
just that; they don’t want to provide
business mortgages – there are
other providers who do.”
So, simply, if you borrow money to
buy a residential home, and then
plan to use part of that for another
reason, permission has to be sought
otherwise the original conditions
on which the loan was given are no
Planning❚authorities❚support❚ to work from home. The key test is dwelling house requires planning
businesses❚being❚run❚from❚home❚ whether the overall character of the permission. The amended order
provided❚it❚is❚not❚too❚obvious❚–❚but❚ home will change as a result of a does not alter the current position:
prefer❚the❚secret❚is❚shared❚with❚ business being conducted from the planning permission for working at
the❚local❚council. property.” The (other) key test it home is not usually needed where
presents is a simple question: “Is it the use of part of a dwelling house
Government policy supports working still mainly a home or has it become for business purposes does not
from home, provided: a business premises?” change the overall character of its
use as a residence.“
1. The property is still used mainly The Communities and Local
as a private residence. Government department goes The key question on which the
further, saying: “Setting up a planning officer will focus is ‘change
2. There is no marked increase in
business at home does not need of use’. Anyone in any doubt about
traffic or the number of people
planning permission as long as the four points at the beginning
the home is still mainly used as of this section should apply to the
3. The business does not involve a private residence.” But what local council for a certificate of
any activities that could be planning authorities need to ask is lawful use to confirm the business
judged ‘unusual’ in a residential whether “a material change of use does not represent a change of use
area. of the building or land occurred”. for the property.
That can only be judged on the
4. The business does not disturb
facts of the particular case and
neighbours at unreasonable
local authorities have the flexibility
hours or create other forms of
and power to make these decisions.
nuisance such as bad smells.
The relevant legislation can be
In other words, it’s okay so long as found at Section 55(2) of the Town
nobody knows it is going on. But – and Country Planning Act (www.
conversely – the planning officer opsi.gov.uk/acts/acts1990/
from the local council wants to know ukpga_19900008_en_6#pt3-
about it as early as possible and he pb1-l1g55). This says that planning
or she is the person that decides permission is not required if the
whether it is allowed. development affects only the
interior of the building, or does
They are not working to specific not materially affect the external
rules or a checklist covering issues appearance of the building.
such as: what percentage of the
floorspace can be used for your Further guidance on this can be found
business? How much traffic is at Circular 03/05: Changes of Use of
unacceptable? and What activities Buildings and Land (para 78 page 12)
are ‘unusual in a residential area’? about Working from home and live-
work units. (www.communities.gov.
The official website (www. uk/documents/planningandbuilding/
planningportal.gov.uk) is meant to pdf/147573.pdf).
be “the complete online planning and
building resource” but it is clearly This Crown copyright publication
not designed with home working states: “A fact and degree
in mind. It simply restates general approach is also needed in
guidelines, namely: “You do not determining when the carrying
necessarily need planning permission on of business activities in a
The Office of the Deputy Prime “For example, the use by a
Minister published Planning householder of a room as an
Permission - A Guide for Business. office, or childminding complying
In Part 2 it focuses (briefly) on with the Department of Health’s
working from home and suggests standard recommended ratios,
the “key test is: Is it still mainly a would be unlikely to mean that
home or has it become business the character of the house’s use
premises?” To read this in as a single dwelling had ceased
full, go to www.communities. and would not normally require
gov.uk/publications/ planning permission. Those
planningandbuilding/ considering working from home
planningpermission. are advised to seek the advice of
their local planning authority at
The Department for Communities an early stage.”
and Local Government
published the report used by “Once the business or non-
planning officers to guide their residential use of the property
investigations entitled Planning ceases to be ancillary to its use
Policy Guidance 4: Industrial, as a single dwelling because, for
commercial development and example, the business has grown
small firms. For a full copy of the and the use of the dwelling for
report go to www.communities. activities related to the business
gov.uk/publications/ has intensified, a material change of
planningandbuilding/ppg4. use for which planning permission is
required is likely to have taken place.
The key paragraphs in this
Crown copyright publication “The likelihood of there having
state: “Many small businesses been such a material change
and other non-residential uses of use may be indicated where
are started by people working the business or non-residential
in their own homes, and use generates visitors, traffic,
technological innovations are noise or fumes over and above
likely to increase the incidence what might be expected if the
of home-working. Home-working property were in use as a single
does not necessarily require dwelling without any ancillary
planning permission. Permission use. Local planning authorities
is not normally required where should take steps to ensure that
the use of part of a dwelling- such developments are effectively
house for business purposes controlled, and should be prepared
does not change the overall to refuse planning permission or
character of the property’s use to use their enforcement powers
as a single dwelling.” where appropriate.”
Written by David Sumner Smith and Phil Smith
Designed by Alistair Martin
Of Home Business Network
Red Lion Lodge, Bentley, Farnham, Surrey GU10 5HY
Telephone:❚+44 (0)1420 526980
Fax: +44 (0)1420 526999
First❚Edition: Published in December 2009
Home Business Network is run by WordZone Limited, a company registered in England, whose registered office is
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