Permissions

It is important to gain permission from various sources before you start running your business from home. Depending on whether you let or own your home, the following will apply:

Mortgage Provider and Title Deeds

If you own your home, you will need to ask your mortgage provider for permission to run your business from the property. For many businesses this will be a simple exercise in phoning the bank or building society, assuring them that the business will not alter the building in any material way and obtaining a letter of permission in due course. However, some residential mortgages will prohibit running a business from home, and breaching the terms of your mortgage can have severe consequences (such as making it repayable immediately). It is therefore essential you check with your mortgage provider and obtain permission before starting your business.

Even if you do not have a mortgage on your property, you will need to check whether there are any restrictive covenants or legal restrictions contained in the Title Deeds. This information is held with the Land Registry; a copy should have been issued when you bought the property.

Landlord

If you rent the property you intend to run the business from, you must obtain permission from the landlord. As with mortgage agreements above, many tenancy agreements will allow for this and landlords cannot ‘unreasonably’ deny or delay permission. However, some tenancies will contain clauses that prohibit running a business from the property. The landlord could also decide that the tenancy should change from a residential to commercial let. Other grounds for denying permission could include the likelihood of causing nuisance to neighbours and/or excessive wear and tear to the property. 

Local Council

Depending on the type of business you are running and how you intend to run it, you may need to seek permission from the local Council. For example, if you will have customers coming in and out of the property, frequent deliveries or want to advertise your business on the property, the council will need to approve this.

The local council needs to establish whether your business will: be a nuisance to your neighbours; result in activities that would be considered irregular in a residential area; damage or change the property. So, for example if you will be using noisy machinery or having vans and lorries often arriving at the property, it will be worth considering how you will minimise disturbance to your neighbours and whether it is really practical for you to ‘set up shop’ from home.

For some businesses, the local authority will need to grant specific certification. For example, home-based food businesses must register with the Environmental Health office of their local authority at least 28 days prior to commencing operations. In this case, Environmental Health Professionals will visit the premises and conduct a Food Hygiene inspection to determine the safety of the food preparation areas and processes. Environmental Health approval is also required for businesses that will create air or noise pollution, and those which involve potentially dangerous chemicals or procedures, and/or the creation of hazardous waste (e.g. automotive workshops, hairdressers, beauticians, tattooists).

Local Planning Authority

If your business will require you to make alterations to your property, for example building an extension or outbuilding(s) not covered by Permitted Development rights, then you need to consult your Local Planning Authority.

Tax Allowances and Implications

• Running costs. When running your business from home, you can claim a proportion of the running costs on your Tax Return. A proportion of your Council Tax, as well as the costs of heating, lighting, calls and broadband can be calculated and claimed. The standard method for this is to take the monthly bills for each and divide by the number of rooms within the property (assuming the business is run from just one room).
• Capital Gains Tax. If you have an area of the property used solely for running the business, for example a workshop or garden room, you may have to pay Capital Gains Tax on this if you go on to sell the property.
• Business Rates. You may need to pay Business Rates on a part of the property if it is used solely for running your business, depending on its rateable value. The rateable value is calculated by the Valuation Office Agency (or Local Assessor in Scotland), and takes into account the market value, its size and how it is used. If the rateable value is £12,000 or less, you should qualify for Small Business Tax Relief; if the rateable value exceeds £12000, you should pay Business Rates.

Insurance

Depending on the type of business you are running, you will need appropriate insurance over and above your home Buildings and Contents Insurance. Your Contents insurance policy is unlikely to cover anything related to your business such as stock, computers or customers visiting the property. Similarly, if you work from one area of your home (such as a home office, workshop, studio or dedicated kitchen), your Buildings Insurance is unlikely to cover this property.

Speak to your home insurance provider in the first instance and make them aware you intend to run your business from home. Establish the limitations of your policy and find out what additional cover you may need to take out. The insurance company may insist you have the necessary Public/Product/Employer’s Liability insurance in place before you run your business from the home they insure.

For small crafts or home baking businesses, Public or Product Liability insurance will likely be necessary. For businesses that have clients and customers coming to the property, Public Liability insurance will be essential. If you are acting as a consultant or advisor to clients without them coming to your property, Professional Indemnity or Professional Liability insurance will be advisable.

Health and Safety

As with running a business from any premises or property, you will be responsible for managing Health & Safety whilst running your business from home. Although risk assessments do not necessarily spring to mind in the home, it is worth surveying the working area and the processes and procedures you will be performing to identify any hazards and mitigate the risks. Consider any measures needed that might impact the property itself and whether these fall within the permissions obtained from the mortgage provider or landlord.

For example, a home food business owner might need to consider the risk of contaminating products with allergens stored elsewhere in the kitchen, and consequently move their commercial operations to a dedicated kitchen outbuilding or converted garage.  A toymaker working with electric tools might need to consider the risk of plugging these into a shed power socket that is not connected to the home RCB, and hire an electrician to rectify this.

Summary

Running a business from home has distinct benefits. It is important to obtain permission from your mortgage provider or landlord, as well as the local authority where applicable. Business owners should be aware of the tax implications and allowances of running a business from home, as well as the need to have appropriate insurance policies in place. It will be necessary to conduct risk assessments in your place of work, as with any business premises.