Using part of your home for work could make you liable for business rates. If you work from home you may have to pay business rates, but each case is considered on its own merits.
Normally a member of Valuation Office Agency (VOA) staff will want to visit your property to check the facts before an assessment is made for non-domestic rates. You are meant to contact the Valuation Officer responsible for your area – but it is unclear how many home businesses do so.
According to the VOA website,
- “If you work at or from home, the part of the property used for work may be liable to business rates while the remainder of the property will continue to be liable to council tax .
- “To decide whether or not part of your property should be liable to business rates there are a number of things we have to consider, including the extent and frequency of the non-domestic (business) use of the room (or rooms) and any modifications made to the property to accommodate that use.
- Each case is considered on its own merits, and normally we will visit your property to check the fact before an assessment is made for non-domestic rates.”
So you should invite a VOA inspector to your home and ask them to assess the business area. They will calculate the value of the room or area if it was put up for rent as business premises. The rates payable differ between areas, but are typically just under half the rent value. A study of 100sq ft, for example, in an area where office space rents for £12 per sq ft, would have a rent value of £1,200, and the person running a business from home would be liable to pay £500 to £600 business rates – but with lots of other adjustments and a possible reduction in their council tax.
Declaring that the study is wholly and exclusively used for business could lead to long term problems, however, if you own the property. When you sell your home, there is no liability for Capital Gains Tax (CGT), provided that it is your ‘principal, private residence’. But if a room is for business use only, then you would be liable for CGT for that part of the property. If the VOA inspector was to have noted, however, that 5% of the use of that room was for domestic purposes, risks of CGT liability are sharply reduced.
Health and Safety laws apply to anyone who works from home.
There are many myths about Health and Safety legislation. It is wrongly blamed by everyone from paranoid teachers to silly shop staff for all sorts of half-witted guidance. But here is a fact: anyone using their home as a business workplace must carry out a health and safety risk assessment to identify any possible hazards to themselves, co-workers, visitors and other members of their household.
That’s right. Anyone who works from home is subject to the Health and Safety at Work Act 1974. There is no need for a formal, written risk assessment for any business with less than five employees, but that does not mean that you are free from legal obligations. Indeed, if a visitor to your home was to hurt themselves by tripping over a work-related parcel or one of your children’s friends was to bump into a filing cabinet used for work, you could theoretically be sued. In an increasingly litigious culture, it is a risk that you do not want to run. The Health and Safety Executive publishes a pamphlet entitled Homeworking: Guidance for employer and employees on health and safety.
This summarises possible hazards such as electrical appliances, loads, noise, trips, fire and even psychological hazards such as stress or loneliness. You should evaluate whether such hazards are significant and – if so – whether enough precautions have been taken to minimise the risk. The five steps to a health and safety risk assessment are:
- Identify any hazards.
- Decide who might be harmed and how.
- Assess the risks and remove them or, otherwise, reduce them as far as is reasonably possible.
- Record your findings.
- Check the risks regularly and take further steps if needed.
You don’t have to write down the results of your health and safety risk assessment unless you employ five or more people.
To find out more about running your business from home contact Sterling Finance on 0161 339 4989 or email firstname.lastname@example.org.