Britain's home-based businesses are calling for their legal position to be
clarified by local councils and mortgage providers amid growing confusion
over which regulations they need to abide by.
Thousands of home-based firms operate in a twilight zone, afraid to inform the
authorities that they exist in case they are hit with severe financial
penalties or even shut down.
Emma Jones, founder of Enterprise Nation (enterprisenation.com
), the website for home-based businesses, said: “At present, home business
owners feel they have to operate under the radar because they are not
recognised by local authorities and so on. They feel they cannot tell anyone
they work from home because they don’t know the rules and regulations.”
She estimates that only about 15% of home-based firms have informed their
local councils or other bodies that they are running a business.
If you run a business from home there are two things that a local council will
want to determine – whether your home office is liable to pay business rates
and whether you need planning permission.
However, the definition of what constitutes a home office is vague. The
problem is compounded by the fact that the interpretation of the rules and
regulations governing such businesses varies across the country.
Some local councils will turn a blind eye to home-based businesses provided
they do not cause a disturbance to neighbours, while others require that
business rates are paid on any part of the house used exclusively for
business.
Wandsworth council in southwest London, for example, said that it would
require a home-based firm to pay business rates on any room in the house
that was used exclusively for business, but would not charge business rates
if it was run from a part of the house that was also used for domestic
purposes.
A spokesman for Wandsworth council said: “For business rates it depends on how
you use the property. If, for example, you have converted a spare room into
a full-time office which you use exclusively for that purpose, you would
need to pay business rates on this part of your home – in addition to your
normal council tax.
“In this case you should contact the business-rate section of your council.
If, however, you are working from your kitchen table or at a desk in your
bedroom, you are exempt and do not need to pay business rates.”
A spokeswoman from Leeds council said that in its area the decision of whether
to levy business rates would rest with the Inland Revenue. She said: “If
someone is just working at a desk in his bedroom, the chances are he
wouldn’t be liable because that room can be easily converted back into a
bedroom. But if someone has converted the garage into a car mechanic
business then the likelihood is that he would be liable for business tax.”
As well as the possibility of business rates, you also need to consider
whether you will need planning permission for your business.
A spokesman for Wandsworth council said: “In planning terms it’s about the
impact you have on your neighbours. It is one thing to be working at home
from your PC, but if vans and lorries start turning up with deliveries, or
customers come calling in their cars, this is likely to cause problems in
the street. If you then want to add some space on to your house for an
office, you might find you get objections.”
He also pointed out that even if you do not need planning permission to run
your business from home, for certain types of business, such as those
involving food preparation, you may still need a licence.
The two organisations you should definitely inform if you are running a
business from home are your insurance provider and your mortgage provider.
Andy Pratt at the mortgage broker Alexander Hall said: “You have nothing to
lose by telling your mortgage provider. The only time they are going to have
an issue is if you are turning your home into a commercial premises, such as
a shop, and there are people coming on to the premises every day.”
However, he advises that in order to make the situation completely
straightforward, business owners should have their company registered at
another address, for example with their accountants.
He said: “In that case, you are an employee of the registered company and just
happen to be working at home. It is no different to working at home as the
employee of another company.”
Enterprise Nation’s Jones said it was vital that all home business owners told
their insurance provider that they were running a business because failure
to do so could have serious consequences in the event of theft or damage to
equipment or business stock, which otherwise might not be covered.
She said: “An upgrade from domestic home contents insurance to a business
policy is not expensive and should cost only an extra few pounds a month.”
When Bruce McMichael moved into his home near Shrewsbury, he converted a barn
on the land into an office, from where he now runs a company that publishes
a quarterly magazine, Taste Shropshire & The Marches.
Rather than wait for the council to find him, he asked for the property to be
assessed. As a result he pays business rates on the former barn, which is
now an office for his two staff, and council tax on his home.
“The house is a converted barn and it had two other buildings with it,” he
said. “One was an old dairy shed and we converted it into an office. It is
separate from the house and three of us work there.”
McMichael said the council also laid down rules on what type of business he
could run from the office. “The council is keen on office-based businesses –
which we are – but we couldn’t, for example, run a garage or a metal bashers
or a shop where you have lots of traffic,” he said.
Jones called for all local councils to provide information on their websites
for people starting up a business at home. “All the information is out there
but local authorities do not make it apparent,” she said.
Some 60% of all firms are now started up at home and Jones said there was an
urgent need for local councils and central government formally to recognise
their existence.
She called for the government to introduce incentives for home-based
businesses to declare themselves, saying that local councils should be keen
to encourage and promote such enterprises because of the benefits they
brought.
“They are keeping money in the area and spending it in local shops, rather
than elsewhere,” she said. “They are also safeguarding neighbourhoods
against crime because they are at home during the day. And third, they are
good for the environment because they are not clogging up the roads by
commuting.”
WHO YOU SHOULD INFORM
YOUR LOCAL COUNCIL Your local authority will want to know if you are liable to
pay business rates and whether you will need planning permission to run your
business from home. To decide if this is likely, ask yourself the following
questions: Will your home business mean more traffic on your street or more
people calling at your house? Will your home business involve any activity
considered unusual for a residential area? Will your home no longer be used
mainly as a private residence? Will your home business disturb your
neighbours at unsocial hours or with unreasonable noise or smell? If the
answer is yes to any of them, you may need planning permission.
YOUR MORTGAGE PROVIDER You need to tell your mortgage provider. Notification
is unlikely to have an impact on your mortgage but it is a good idea to let
them know.
YOUR INSURANCE PROVIDER Upgrading from a domestic to a business policy will
cost a bit more but, without it, stock and equipment may not be covered.
HM REVENUE & CUSTOMS You must register for Vat if your business has made
more than the Vat registration threshold – currently £64,000 – in the last
12 months, or if it is expected to within the next 30 days. Details at hmrc.gov.uk
.
HEALTH AND SAFETY There is no need to notify a health-and-safety inspector
even if you have people visiting your home. However, you should comply with
the five steps of risk assessment: identify any hazard; decide who might be
harmed and how; assess the risks and remove them; record the findings; check
the risks from time to time. You can download a booklet at hse.gov.uk
.
