There is a range of different types of business that can be run from home, all of which are subject to different regulatory requirements and practical considerations.
Here are the basic legal aspects of running a business from home.
Legal issues
Landlord and mortgage provider permission
Anyone intending to trade from a home base should inform their mortgage company or landlord and check that they are allowed to do this under the terms of their mortgage or tenancy agreement.
Landlords may be unwilling to grant permission if, for example, there will be nuisance to neighbours caused by unreasonable noise or parking problems due to frequent deliveries to the property.
Planning permission and building regulations approval
While it is not likely that you may need to seek planning permission or ‘change of use’ permission to run a business from home but if it is necessary to adapt part of your home or substantially change its use, planning permission may be required.
In which case an application should be made to the local authority planning department of your local council.
Insurance
Most domestic home and contents insurance policies do not include cover for business activities. For example, anyone running a mail order business from home will need to insure their stock against theft or accidental damage. If it is intended to store business equipment or stock in a garage or shed, it will be necessary to check that this can be covered.
Business rates
If part of the home is set aside exclusively for business use, it may be necessary to pay business rates. The decision about how much is due is made on a case-by-case basis by local valuation offices or assessors depending on where in the UK the business is based.
The Valuation Office Agency has more information about rates for a home-based business in England and Wales at www.gov.uk/introduction-to-business-rates/working-at-home
Trading licences
Certain types of business need to be either licensed or registered, usually by the local authority in the area where they are located, or by a specific regulatory authority. This applies regardless of whether or not the business is run from home.
Examples of the types of licence or registration that are required for different types of home-based business for example, Taxi and private hire licence, Skin piercing licence, Massage and special treatment (MST) licence, Animal boarding or home boarding licence, Food Business Registration.
Liability for tax
Before starting up it is important to check whether running a business from home will affect liability for taxation. For example:
- ‘Use-of-home’ deductions are available to sole traders and partnerships that use their home for business purposes. The deductions allow expenses incurred when using a home for business purposes to be offset against taxable income.
- Anyone planning to use their own vehicle for business purposes needs to keep detailed records so that they can separate their business from their private mileage and claim for business miles as a business expense.
Health and safety
Anyone running a business from home may have legal obligations under health and safety legislation, depending on the type of business they run, their work activities, and whether or not they employ any staff.
Generally, self-employed people who run their business from home and do not have any employees, and whose work activities pose no potential risk of causing harm to other people (apart from themselves) are exempt from complying with health and safety law.
Other things to consider
There are a number of practical issues to consider when starting up and running a business from home. These include security, document retention, IT and administrative support.
Security
Before starting to trade from home, it is important to consider whether additional security, such as a burglar alarm or window locks, will be needed. For example, if the business deals with high volumes of cash or cheques, adequate storage, such as a small safe will be required, and money should be paid in to the bank on a regular basis.
Document retention
Business proprietors must keep records of all receipts and expenditure for tax purposes. The exact records kept depend on the type and size of the business, but they must be sufficient to enable the completion of a precise and accurate tax return. All sales and other business receipts and details of expenses incurred should be recorded and the records kept secure.
IT and Cyber Security
IT and cyber security is a crucial issue and it is important to ensure that firewall and antivirus software is in place to protect any business information, records and data that are stored on PCs, laptops and tablets. There are also various cloud-based data storage and software options that are useful for anyone running a business from home.
Receiving mail
Setting up a Post Office (PO) box number or commercial mail redirection service can be useful to restrict the amount of business mail received at the home address. Go to www.royalmail.com/personal/receiving-mail/po-box for further information about setting up a PO Box.