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Steven, M.Acc.
Steven, M.Acc., Instructor
Category: Business
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Experience:  Accounting instructor. Master's degree in Accounting.
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I am considering whether to expand my business and rent a

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Hi. I am considering whether to expand my business and rent a business premise or not and I wonder if (for the sake of tax purposes and the Inland Revenue) a premise has to have business rates or can I rent a premise that has residential council tax? It would make no difference to my business needs... I just need a place that has power and broadband.

Hi, Vince, and welcome to JA!

Certainly, using a residential space to run a sizeable business may bring with it some concerns like breaking the lease agreement, needing to acquire licenses and permits, violating zoning regulations, increasing foot traffic and noise, increasing utility bills, and being subject to business rates. In your case, however, it sounds like none of those things are a real concern. In fact, according to the UK's Small Business Survey (SBS) 2015, 59% of businesses without employees run their businesses from home.

The good news is that whether a business is based out of a residential space or a business premise makes no difference for the sake of tax purposes. Rent and the resulting residential council tax are legitimate (deductible) business expenses as long as they are ordinary and necessary. Keep in mind, however, that if only a portion of the residential space is used for business purposes (and the remainder is used as a residence), only the business portion of the associated expenses (rent, council tax, utilities, etc.) are deductible.

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