Is a home business liable for business rates?

The Valuation Office Agency (VOA) is an executive agency of HM Revenue & Customs (HMRC). It has 85 offices and employs around 4,300 people to deal with business rates and council tax.

According to the VOA, if you work at or from home, the accommodation within your home used as an 'office' may be liable to business rates. The remainder of the property will continue to be liable to council tax - although an alteration may be made to its tax banding.

There are lots of things taken into account in deciding if a room in a house that is used as an office should be liable to business rates. These centre on the extent and frequency of the non-domestic use of the room plus any modifications made to the property to make it usable for business.

A valuation officer is meant to visit the property to check the facts before an assessment is made for non domestic rates. But many people work from home without notifying the VOA – which is part of the reason that accurate statistics on home business are unavailable.

The VOA offers four examples of effects upon liability for council tax and business rates:

A self employed solicitor using his old dining room as an office
In this first instance, there is a detached Edwardian dwelling in a residential area owned and occupied by a self employed solicitor who practices from the property, specialising in matrimonial law. The front room on the ground floor is furnished with sofa and comfortable chairs, has a TV set, and ornaments/photos of a personal nature displayed around the room. It is used on an occasional basis as a waiting room for clients during weekdays, and as the lounge by the occupier during evenings and weekends.

The former dining room is used as an office equipped with computer, dedicated fax and telephone line, filing cabinets, desk and shelving stocked with law books. No domestic use is made of this room. It is used by a part time secretary when the solicitor is visiting clients or attending court.
The ground floor kitchen is used for preparation of family meals, but also to make tea or coffee for clients. The first floor accommodation of bedroom and bathroom is wholly used for domestic purposes.

According to the VOA, the office is the only non-domestic part and will be assessed for business rates. The principal purpose of the front room is to serve as a lounge. In this instance, the non domestic use is sufficiently minimal so as not to warrant assessment for business rates. The lounge and the remainder of the dwelling will be banded for council tax purposes.

A garage that has been converted for business use
In another case, an integral garage of an estate house is converted to an office with plastered walls, electric power points, solid front, suspended ceiling and floor screed suitable for carpeting. A separate telephone line has been installed. Access is through the hallway of the house. All toilet facilities are in the main house.

The occupier claims that the room is used by the family in the evenings and occasionally at weekends. During the day the occupier designs computer software. He is employed by a major company to work at home, because of a physical disability. All of the equipment has been provided by his company and is specially adapted for his needs. He visits his former office on an occasional basis.

In the eyes of the VOA, the former garage is no longer domestic property. It has been adapted for office use and should be assessed for business rates. The remainder is domestic.

Somebody who uses their home to write up reports
In a third case, the occupier is employed as a site finder by a major building company, and travels across most of the southern part of the country, using her home as a base, but calling into the company office once a week to pick up new instructions, for meetings, and to leave completed work.

She has a four drawer cabinet in the corner of a dining room, which also functions as an 'office' for the family computer, and there is no dedicated telephone line for business purposes.

The occupier is out visiting sites four days a week, and does 'writing up' at home on the dining room table in the evenings and at weekends.

No clients or members of the public visit the house for business purposes.

In this instance, the whole of the dwelling is domestic property, and should be banded for council tax only.

A doctor consulting from home three days a week
In the final case, a doctor uses a room in his house as a consulting room three days a week. The main practice surgery is situated some three miles away near the town centre. The house is more convenient for patients who live locally.

A concrete ramp has been added to the front door and the door opening to the hall and the consulting room has been widened to accommodate a wheelchair. No one in the doctor's family is disabled.

In the room itself there is an examination couch which is essentially a single bed with a cotton sheet thrown over it. A paper sheet is added and removed after use by each patient.
There is no office desk as such but there is a computer, table and chair in a corner of the room, which are used by the doctor during his consultations.

No patients’ records are held at the house, nor are there any medicines. Basic medical equipment is kept in the doctor’s medical bag or stored in a drawer after use.

There is planning consent for use as a branch surgery and part of the front garden has been surfaced to accommodate two or three extra private vehicles. There are parking restrictions in the street.

On the walls of the consulting room the doctor has attached pictures painted by his young children, and there are toys in the corner of the room which belong to his children but can be played with by young patients. There is a brass sign outside the front door to advertise surgery hours.

The remainder of the week the doctor attends surgeries at the main premises, and in the afternoons he makes house calls. Other than for consultations the room is often unused, but when friends come to stay it can be pressed into use as a spare bedroom at weekends, and some evenings the doctor uses the room to read professional papers or watch a portable TV away from the children.

In the eyes of the VOA, the principal use of this room is as a doctor's surgery, and occasional use for domestic purposes is minor. The room should be separately assessed for business rates, and the remainder of the dwelling banded for council tax.

To find out more, go to www.voa.gov.uk