5

Many small start-ups find setting up an office at home the most attractive option. It is cheap and handy, but there may be drawbacks.

The Legal Position

The first thing is to consider is whether or not you can legally set your office up at home. If you rent your home there may very well be a clause in your agreement which prevents you running your business from home and even if you own your own home there can be a leasehold clause or, in the case of a freehold property, a covenant which similarly prevents you doing so.

So before you set up your office you should check the legal position. However, even if there is some sort of preventative clause it might still be possible for you to have a home office. For example, most of the clauses preventing business use are designed to ensure that there is no nuisance or noise caused to neighbours, mainly by people coming or going to your office premises. These days with many people working at home or running their own part-time business (such as EBay or similar) from home that shouldn’t be a problem so long as you are not causing noise or disturbance to your neighbours.

That doesn’t mean you might not be challenged and certainly you could be evicted from a rented property if the landlord wasn’t happy, but with freehold or leasehold ownership the position is unclear and it’s almost impossible to enforce many of these covenants as no-one knows who actually owns the right – and if they do then the owner probably doesn’t care anyway.

You should also clear things with your mortgage provider.

Is It a Good Idea Anyway?

You need to ask yourself if working from home will provide the right working environment as it can be difficult to discipline yourself to be productive. You need to be able to take yourself seriously. Even if you work only a few hours a week, you should remember you are running a business.

If you decide it is for you then establish a work space. It will be easier to concentrate on work once you enter the work space, and to switch off when you leave.

You should separate ‘at work’ from ‘home’.  Discourage social phone calls and domestic interruptions during your working day.  Arrange your work patterns to fit in with the family and set working hours during which you are not to be disturbed. Outside working hours, give family and friends your full attention.

Other points to consider are:

  • Will working from home provide the right image?
  • Do you expect visitors to come to your office?
  • What will they think about coming to a private house?
  • Should you arrange to visit their premises or hire a meeting room instead?
  • Will your address be suitable? If you are in a suburban housing estate not only will visitors be unimpressed but potential suppliers and customers can also see where you are with an online search. Some suppliers won’t send to non business areas. Perhaps you should use a mailing address where you can also hire a meeting room and still work from home.

Business centres often offer a ‘virtual office’ facility, receiving post, telephone calls and faxes on your behalf and then forwarding them on to you.

The Financial Implications

Working from home you can claim a proportion of bills (such as electricity) as business expenses and offset against tax. This is based on the area of your house used solely for business use. Therefore if you have five rooms in your house (ignore kitchen, bathrooms, halls) and use one solely for business use in theory you can claim one fifth of all utility bills and even of the mortgage.

However proceed down this route with caution. For example if you claim a portion of your mortgage payments or rent against tax you may find yourself liable to pay Uniform Business Rates (in addition to your Council Tax) and have a capital gains tax liability on 1/5th of any gain you make when selling your home. Ask your accountant to advise you on this.

Insurance

You must tell your insurers you work from home (and change the insurance on your car, if you use it for business). Otherwise, your existing insurance may become totally invalid. You may be required by law to take out public liability insurance and if you employ people — even part-timers — employer’s liability insurance is compulsory. Contact your broker for details.

Conclusion

Working from home can be advantageous but you do need to check out the above points before deciding if it is for you.

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5 Responses to “Setting Up an Office: Part 5 – Working from home”

  1. Grammm says:

    Good post. Lots of information.

  2. Hi Sir James,
    You have a very nice informative site, for sure I’d like to bookmarked this. My site is all about working at home, I got so many ideas with your articles which I can add to my several articles too, (with your permission).
    Thank you,
    Wilfredo

  3. nice job on your blog. very informative. I really like how you laid it out for your readers a lot of things they need to consider when getting started.

  4. James Green says:

    Thanks Johnny, glad you like the site and the info we provide.

  5. johnny shull says:

    this site is nicely laid out and very informative. You bring up a lot of info not considered by many people when starting a home business.(myself included) I have book marked this site so that I may continue to read this valuable content

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