Here at LeeP Accountants we often get asked about allowable costs and working from home. One of the most common questions is around whether business rates need to be paid in addition to council tax if a home office is used.
Right now, the rules on whether a home-based business should pay business rates are rather confusing meaning that many are afraid to inform the authorities that they exist in case they are hit with large financial penalties.
In summary
If you work from home, you may become liable for business rates for the part of your home you use for work purposes in addition to council tax which is payable on the domestic part of your home.
It will depend on how OFTEN, how LONG, WHAT else you use your home office for and whether any modifications have been made to the building to accommodate work use.
It is likely you WILL have to pay business rates if:
- your property is part business and part domestic, for example if you live above your shop
- you sell goods or services to people who visit your property
- you employ other people to work at your property
- you’ve made changes to your home for your business, for example converted a garage to a hairdresser’s
The HMRC guidance is here.
However, if you:
- use a small part of your home for your business, for example if you use a bedroom as an office and you continue to use it as a bedroom sometimes
- sell goods by post
Then you won’t need to pay Business Rates.