Working from Home or Running a Business? What are the Legal Implications?
With the end of national lockdown now potentially in sight, there are many who have been working from home who would like to make the move permanent or wish to start running their own business.
But what are the legal implications? Do you need to inform your mortgage provider? Perhaps you are thinking about erecting a purpose-built shed or office at the bottom of the garden – do you need to get planning permission first?
Working from home and running a business from home may appear similar on the face of it, however, are two separate concepts which are treated very differently.
Working from Home
For employees who are working from home and essentially using the home as their office or base, aside from the legal responsibilities placed on employers to treat their workers as they would if they worked on the business’s premises and in accordance with their contract of employment, there are usually no restrictions to use your home for this purpose.
In contrast, there are several considerations and compliance issues to think about when running a business from a property you live in.
Running a Business from Home
It is not illegal to run a business from home, but there are different rules depending where you live.
Can I run a business from a council house?
You will need to obtain permission in writing from the local authority or housing association before starting your business. This may entail completing a dedicated form or perhaps something more informal, depending on the rules of the local authority. You should check your tenancy agreement for any wording that might prevent you from running a business from the property; if you are granted permission, the local authority may require you to sign another agreement reflecting the change. If the local authority believes your business has the capacity to disturb the neighbours or damage the property, they may refuse to grant permission. A further consideration of running a business from a local authority owned property can adversely impact any Council Tax you pay or affect benefits you receive.
Can I run a business from a privately rented property?
It is possible, although you will need to get your landlord’s permission, which may change the terms of your tenancy agreement and necessitate you to signing a new one. A landlord may refuse permission if they believe the business would be detrimental to the area, disrupt neighbours, or damage the property.
If the business is run over the internet, you might not want to register it at the rented property address, particularly if items are to be returned from customers. Not disclosing your home address also protects you and your landlord against disgruntled customers and/or cyber criminals. In these circumstances, you could sign up for a parcel forwarding service.
Can I run a business from my own property?
You should firstly find out if there are any legal restrictions, known as ‘restrictive covenants’ on running a business from your home. Such covenants can restrict certain uses of your property. You can find this information on the property title (held by HM Land Registry) which you can get a copy of online at their website, or, if you have them, you can check the documents you received from your solicitor when you purchased the property.
What constitutes running a business from home?
You will be considered as running a business if you:
- Handle the business’s success or failure
- Have several customers at the same time
- Decide over how, where, and what time you work
- Decide about staff hiring/management
- Provide your own equipment
- Charge a fixed price for your work
- Sell services or goods to make a profit (including via websites, apps, or social media)
Mortgages and working from home
If you have a mortgage on your property, it may prohibit using your home as a base to run a business or working from home, which they often do, so you should check the terms. If you are prevented under the terms of your mortgage, then you will need to obtain permission from your provider. Failure to do so will result in a breach of the terms of the loan, potentially leading to desperate consequences requiring you to repay it in full immediately.
Planning permission may also be a consideration if you are changing your home to accommodate your business, particularly if the running of it causes a ‘material change’ in the way the property is used. A quick check with your local planning department is advisable and likely to prevent any problems going forward, and obtaining a Certificate of Proposed Lawful Use or Development will provide you with assurances that you can go ahead.
Whether you can run a business from an outbuilding such as a shed or garage depends largely on the type of business you want to start and if it will cause a material change to the use of the property. If you are considering setting up a home office in your garden as a separate structure, you may require planning permission and will almost certainly do so if you are employing staff who come in daily or intend to hold business meetings.
Where there is potential for neighbours to be disturbed or disrupted, it is likely you will need to get the planners involved before commencing any construction. Creating a garden office suitable for use under permitted development rights, will need to fall under certain rules. For example, it must be single storey with a maximum height of 4 metres with a pitched roof and 3 metres for other types. Structures built within 2 metres of a boundary, can be no taller than 2.5 metres and must not cover over 50% of the property’s outdoor space.
Where the business expands, you may need to apply for planning permission (if you had not already done so) or subsequently require a licence. So it is essential to reassess your obligations in relation to planning regulations and licences as your business develops.
Depending on the type of business, you may need a licence from your local authority, although no special licence is required simply to run a business from home. Businesses that require licences prior to inception are:
- Financial Services
- Importing / exporting
- HGV services / logistics
- Taxi driver
- Private coach operator
- Pet shop / dog breeding
- Security services
- Sports coach
- Ear piercing
This list is not exhaustive and is merely an indication of business areas where licences are required no matter where they are run. For a definitive answer as to whether your particular business requires a licence you should contact your local authority.
Changes to Council Tax when working from home
Running a business from home may change your Council Tax liability, because the part of the property given over to running that business may become liable for business rates. If in doubt, contact the Valuation Office Agency for further details.