There is a time when your choice to be a freelancer and work from home could impact your right to live in your house. It seems so simple nowadays. You can use the internet to connect with clients, and from there you can earn a wage without commuting. One in four people in the UK agrees with you, as the gig economy continues to grow in influence. However, with the increased numbers comes increased scrutiny from the Government and the taxman. Therefore, it is not so simple as just getting started and seeing how it goes. Let’s guide you through some of the essentials.
The Small Business, Enterprise and Employment Act (SBEEA) 2015
Before 2015, you could not live in a business or run a business from your home. The Housing Act 1988 and the Landlord and Tenancy Act 1954 made it impossible to do this legally. If you told your landlord that you were starting a business in your rental, then they would be obliged to issue a Business Tenancy Agreement. The problem for the landlord is that under Part 2 of the act, they would then have to keep renewing the agreement no matter what. For you, it meant you should not be living on the same premises.
SBEEA (2015) allows landlords to issue Home Business Tenancy Agreements. Brilliant, you say. Problem solved, business running, happy days.
Unfortunately, your landlord will still be likely to seek legal advice. Why? Well, when does a freelancer business run out of the home become a full-fledged business needing a commercial property?
If you are a freelance writer working from the spare bedroom, the growth of your business is not likely to impact your local area. The only time it might get difficult is if you employ someone and invite them to your home to work alongside you. It is likely that if you do subcontract work to someone else that you will work through the internet and they will be at home too.
However, what if you set up your online store? It might have started with you selling junk from the attic but now you are sourcing supplies and marketing for a profit through eBay or Amazon. You are receiving parcels to your home for your business. Consequently, you will be significantly adding to the traffic in your area. You will also be storing stock in your home and maybe even invalidating your home insurance.
Equally, if you start a small enterprise doing haircuts from your backroom, all is good until you book up your full day with clients. Now you are creating a parking issue for residents and potentially storing chemicals onsite that change the requirements of your insurance and the insurance your landlord should have taken out.
When does a freelancer business become just a business?
The grey area from when a business is just a business is difficult to discern. If you need planning permission to change the use of the building, then you are a business. If you pay business rates, you are a business. If you need business-specific insurance, you are arguably a business. At the point, these considerations become an issue for your landlord; they may have difficulty issuing you even a Home Business Tenancy. Also, if you are living in your property while running the business, you may fall foul of definitions if the landlord needs to change the usage of the building with the council. You would need to check then if you can still live there.
If you bring work home from the office to do on an evening, you can be sure you are not running a business from your home. If you travel for work and do the paperwork at the kitchen table, then you are probably fine. However, if you start to make a noticeable impact on your local area with your choices, you are perhaps entering a grey area where your landlord will feel uncomfortable.
What should a freelancer and tenant do?
If you are a tenant working as a freelancer, you should tell your landlord. If your landlord discovers some other way that you are working from the house or flat, they may react by evicting you before seeking any advice. Your landlord may seek legal advice and will probably set limits on what your freelance business can entail. As you work as a freelancer, you need to be conscious of the time you move from being a sole trader to being a small business. Then, you should seek advice.
This post was written by Colin Bates, the Director of Mackenzie and Dorman, leading solicitors based in Belfast, Northern Ireland.
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