Entrepreneurs and SMEs are increasingly basing their business in a spare room, the garage or garden 'shed'. But what about the implications? Are there policies you need to have in place? Paul Reader, Managing Partner and Head of Commercial and Dispute Resolution, advises on a growing trend.
Although ‘shed’ working is becoming a popular way to run a business from home, there are various financial considerations, as well as insurance, legal and regulatory requirements to bear in mind.
Anything considered a disturbance to neighbours such as noises, smells and extra traffic may all need planning permission.
Business owners have a range of health and safety responsibilities towards members of the public and their employees.
To minimise the chance of disputes affecting your business, set up agreements and contracts in the first few years – and seek relevant advice from regulators.
Working from your 'shed' is a great way of keeping costs low as you grow your business. But it doesn’t make you exempt from legal and regulatory requirements.
You won’t necessarily have to apply for planning permission if you run your business from home. Planners will consider whether the overall character of the property will change as a result. Structural changes or additions may require planning consent.
You might require permission if the following apply:
• The property will no longer be used mainly as a private residence, or it’s become mainly a business premises
• There will be a marked rise in traffic or people calling round
• The business involves any activities considered unusual for a residential area
• It will disturb your neighbours at unreasonable hours, or create other forms of nuisance, such as noise or smells.
If in doubt, apply for a ‘Certificate of Lawful Use’ to confirm the proposed activity is not a change of use.
Changes affecting your property’s structure, escape routes and fire prevention, access to or use of, may be regarded as ‘building work’, and could require building regulations consent.
If the Valuation Office Agency has given a rateable value to part of your property you run your business from, you may have to pay business rates on this.
Capital gains tax
When you sell your property, take accountancy advice on whether you have to pay capital gains tax on the part used for your business.
Check for restrictions on your property’s title deeds which prevent it being used for business purposes. If any exist, contact the people who benefit from the restrictions, as they may be prepared to waive them. If they’re not available, then get advice on whether indemnity insurance is available to cover claims for breach of the restriction.
Insurance and consents
Check whether you require your building insurer and mortgage lender’s consent to run your business from home. Are your business activities and assets, such as computers, covered by your existing insurance?
While public liability insurance is not mandatory, it’s worth considering this cover if you have anyone visiting your property, or you’re working at a customer’s. And if you employ anyone, then employer liability insurance should be put in place.
Health and safety
Business owners have a range of health and safety responsibilities towards members of the public (both inside and outside your property), employees, and visitors. You must carry out a risk assessment of the business activities and location to identify and help mitigate any risks.
You must do everything you can to make sure you have the correct policies. If you have fewer than five employees, it’s advisable, but not a necessity, to have a written policy.
Make sure you provide employees with a statement of their employment terms and conditions. If you’re in default of providing this, they can apply to an employment tribunal and ask for compensation.
Regardless of where you run your business from, you’ll need to set up a number of contracts in the first few years. Shareholders’ Agreements, Directors’ Service Agreements, and Terms and Conditions are key to negating a dispute further down the line. Also, get to know your regulator(s), if relevant. They can really help to make sure your business stays on track – right from the start.
To contact Paul Reader to discuss your commercial or dispute resolution legal matters call 01892 526 344 or email firstname.lastname@example.org.
This article is included in the Spring/Summer edition of Business First, Berry & Lamberts Solicitor’s bi-monthly magazine for business owners and professionals. To order your pdf or hard copy email email@example.com
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.