Business Rates and working in/out of home

jaimito

hi there,

i have been doing some research into working from home and it seems like you have to pay business rates on the part of your property where the business is taking place. i am thinking of setting up a web design business but can do without supplementary tax.

does anybody know if these rates can be avoided by trading from a public place such as a coffee shop or library?

or:

if i combine an area of my home, for example my bedroom, with sleeping and working do i still have to pay full business rates on this room?

thanks!

jaimito

PlutoinCapricorn

If you are just sitting at your PC and working online then there is no problem. You probably won't be doing anything that you wouldn't do anyway, so there is no need to pay business rates.

If you turned one room into a workshop or treatment room where patients came, it would be another matter and business rates might apply.

https://www.businesslink.gov.uk has all kinds of useful information

Pennywise

The official guidance is that no business rates will apply for a self employed person just working on a computer at home.

That changes for both business rates, planning permissions, building regulations, etc., if you employ someone to work at your home, regularly have customers/supplier attending your home or store goods (i.e. for resale) at your home.

If you're a web designer, working alone, rarely having anyone coming to your home on business, then I'd say you've nothing to worry about.

A worthwhile point to ponder, though, is that if you were liable to business rates, along with a business rate bill would come a reduction in your personal council tax as the "business" part of your home would then be taken away from your council tax band valuation. The local council can't have it both ways! I've seen a case where the householder actually saved money because the council tax fell into a band far lower, and the business qualified for the 50% small business rate relief.

dark1

Generally speaking, you will only attract business rates if you specifically set aside part of your home wholly for business use. If however the area you work from still has a "reasonable" amount of domestic use when not working, then the non-domestic use would be considered 'de minimus', and your existing council tax would continue to cover it.

I was going to post a link to the relevant page at the VOA's website, but being a relative newbie, I'm not allowed to. Ho hum.

lincroft1710

Most people who work from home do not have a designated room which is solely for business use and therefore will not be liable for business rates. The phrase we used in the VOA was "end of day", i.e. if at end of "business" day the room used reverted to normal household usage then there was no business rate liability.

Although I do not dispute the content of Pennywise's post I would advise that it is very dependent on the CT band and whether the dwelling concerned falls at the top or bottom of the band for it to be financially beneficial to have a business rating.

jaimito

that's great advice guys, thanks so much for the insight that definitely helps me out.

just one more question:

if i am working from home but not paying business rates am i still allowed to apportion off some of the utility costs to the business?

thanks!

jaimito

PlutoinCapricorn

Sole traders whose registered address is their home address and who do actually work from home are entitled to charge a percentage of their running costs to expenses.

This includes utilities, service chagres, council tax, mortgage interest, phone and internet costs. HMRC may one day decided to investigate, so be prepared to justify whatever percentage you claim. It is not possible to calculate everything down to the last kilowatt; what many people do is to count their rooms excluding the kitchen and bathroom, and calculate what percentage of the remainder is used for work purposes. People who work from home full time obviously use more electricity than sole traders who are out all hours, but the latter have much higher transport costs.

jaimito

thanks plutoincapricorn that information is much appreciated. so long as i know that i dont have to pay business rates and can still claim back a percentage of utilities as a sole trader then that is great for me!

thanks!

jaimito