If I work at/from home do I have to pay Business rates ?
A grey area still exists across the UK with regard to the application of, and liability for, Business rates to home working and different local authorities seem to apply different interpretations of the various guidelines.
In general terms however, when part of the employee’s home is used as a workplace where the ‘non-domestic activity’ precludes the use of that area at any time for living accommodation, the part of the property affected could be assessed by a local authority as being ‘non-domestic’. In such cases that part of the property could be subject to the Business rate.
In most cases however, local authorities do not seem to be ‘hunting down’ home workers and most seem to apply a common sense rule that, if the area used for work purposes reverts back to normal domestic use/living accommodation use after say 5pm, then they would not impose a Business rate.
Other considerations that might be taken into account include situations where the employee has received formal planning permission from his/her local authority for what they term a ‘home office’. This most likely would include permanent physical alterations made to the domestic residence, perhaps the building of a specific office within the house. In such cases, a liability would arise for that part of the property covered by the planning permission.
Occasionally local authorities have questioned the amount of time that work is conducted in a residential home, their main concern here being how much disturbance and environmental impact there might be on the local neighbourhood.
Generally, if you classify part of your house for business purposes and claim costs such as mortgage interest, heating and lighting, then the work part of the building could become liable for Capital gains Tax (CGT). The CGT levied is in proportion to the percentage of the house being used for business purposes. If two rooms in a 12-room house are designated as being for ‘business purposes’, then CGT would be applied as though a 1/6th Gain had been made in the relevant Tax Year.
In most cases so-called bespoke ‘Garden Offices’ do not attract Business rates as they are most often deemed to be non-permanent, non-fixed structures in the same way that a garden shed is ‘non-permanent’.
Utility companies generally seem to apply a rule that if 66% of the supply of gas, water or electricity is for domestic use, then no Business Tariffs apply.
NB : Please note that you should always confirm that there are no restrictive covenants, restrictions in mortgage agreements or lease/rental/tenancy agreements that would prohibit use of the home as a place of work.
