Are you allowed to run a business from home?

Home Business Network explores the legal position of home-based businesses.

If your property has been changed substantially to make it possible to use it for business, your local authority will almost certainly want to assess the property for business rates. But if your home is fundamentally unchanged, there shouldn't be a problem. However...

Problems may arise when levels of activity grow around the home. For example, a successful beauty therapist might want to convert a garage space into a treatment area and install specialist equipment. If the business grows and generates extra traffic, or the peace of the neighbourhood is disturbed or when neighbours find themselves unable to park their cars, the neighbours could well inform the local authority.

Certain types of business require a licence from the local council. This is entirely separate from the planning permission aspect. For example, there are a lot of food related home businesses and they would need a licence. This fetaure looks only at the planning permission aspects of working from home. 

Thankfully, the government has relaxed home extension and conversion planning permission rules since 2008. In theory it is now easier, cheaper and quicker to adapt and extend your home.

However, it is important for self-employed and home-based business owners to know about the changes to a home which will require planning permission. If you answer “no” to any of the following questions, then planning permission will probably be required:

• Will the property be used mainly as a private residence?
• Will the business activities keep traffic and visitor levels to the current level and not disturb the neighbours?
• Are these sort of activities usual in a residential area?

In theory, a visit to the website www.planningportal.gov.uk is a good place to check out whether planning permission is required. But answers to website search questions involving home business or home-based business are conspicuous by their absence - and there is no phone number for enquiries (even for the press!).

Most home-based business owners will be paying Council Tax. But if the Valuation Office (VOA - the organisation responsible for banding all domestic property in England and Wales) discovers a business is being operated from a property, it may conduct an investigation to establish whether the property should be listed for non-domestic rates.

The VOA may wish to list a property for non-domestic rates if the answer to any of these questions is "yes":

• Is a space within the property used exclusively for business purposes?
• Is this space used frequently?
• Have modifications been made to the property to accommodate its business use?
• Do employees or clients come to the premises or is the business address advertised publicly?

The key point, of course is how to avoid problems with neighbours and bureaucrats, and the guidelines seem fairly clear.

Ensure that all areas of your home retain some form of domestic use, with the sort of furniture that would normally be found in residential premises.

Avoid physical alterations to the property if you can - or at least ensure that your home still looks like a home.

If the neighbours are going to find out (sooner or later) that you are running a business from home, it might be advantageous to tell them first. Emphasise the benefits that it brings them, such as the security benefits of you being around so much of the time and offer to accept deliveries on their behalf when they are out.

Depending on the nature of your business, it's probably sensible to check with:

• Your mortgage lender or landlord/freeholder - your mortgage or tenancy agreement may stop you using your home to running a  business.
• A solicitor, to check out any legal aspects.
• Your insurance provider, to establish if you need to take out extra insurance.
• The Valuation Office Agency (VOA), to see if you will be charged business rates.
• HM Revenue & Customs and an accountant, to see what your income, VAT and Capital Gains Tax position is.