HOME ALONE -- AND IN BUSINESS....
Thinking of working from home? Itís not as
difficult as you think, but there are pitfalls and it pays to listen to the
experts, as Rick Maybury explains
By the end of 1995 it has been estimated that
as many as five million people could be earning their living, working from home.
That figure includes both home-working employees of larger companies and the
self-employed; according to the experts that that number could double within
the next ten years. Working from home can seem like an attractive prospect, as
some of those who has been forced into it by bad weather or industrial action may
have found out. Apart from not having to waste time commuting it can be very
productive, without the distractions and time constraints of normal office
life, and there can be considerable financial savings for everyone involved.
However, home-working on a permanent basis is a very different matter and
requires a fair amount of planning to do it properly, or it can quickly turn
into a nightmare.
The first thing to do is set aside a clearly
defined workspace, preferably in a separate room; donít try and run a business
from the kitchen table, unless you live alone and are used to working in a mess.
A word or warning, creating a purpose-designed work-room within your home might
sound like a good idea but it could result in the loss of some capital-gains
tax relief, when you come to sell your property. To clarify this important but
easily overlooked point, and the many others that will arise get, yourself an
accountant, he or she could turn out to be your best friend in the years to
come. A good accountant should save you far more in taxes than they cost you in
fees, but choose carefully. Take heed of personal recommendations from other
home-workers, at the very least make sure the ones you talk to are used to dealing
with businesses of the size and type youíre involved with.
One of your accountantís first job will be to
show you how to set up a book-keeping system and advise you on opening the
right kind of bank account. Book keeping for a small business neednít be difficult,
properly organised, it shouldnít take more than an hour or so each week. There
are plenty of simple to use computer-based accounts packages for small business
users, though you really should keep records on paper as well, computers have
been known to go wrong, catch fire or get stolen!
The accountant will also be there to steer
you through the maze of trading formats, and help you decide whether or not you
need to set up a registered company, operate as a sole trader or a partnership.
Your accountant will act on your behalf for all dealings with the Inland Revenue,
and this is where they really earn their keep. The tax system in this country can
appear complicated to an outsider, you need someone who can make sense of it
for you. The system can be made to work in your favour without breaking the
rules -- you would be surprised how much of the cost of working from home can be
offset against tax -- but it takes expert knowledge to know where the tax
breaks are, which rules are flexible, and which ones should not be broken! Itís
really not worth trying to do your own tax returns, unless youíre a trained
accountant; the Inland Revenue know every trick in the book and you can be sure
they cast a far more critical eye over DIY returns, than those submitted by
You will need to work out if you should register
for VAT. VAT is not necessarily the bogeyman itís been made out to be. The
paperwork is now quite simple and provided you keep accurate and up to date
records, and pay your bills on time, it can work to your advantage. If youíre
VAT registered youíll be able to reclaim the tax on office equipment, stationery
and relevant supplies or services, an instant saving of 17.5 percent!
Insurance is something many home-workers
overlook. Household contents insurance wonít normally cover theft or damage to office
equipment owned by you, or your employer. Some insurance companies now offer
extended cover for home-workers, though the limits can be quite restrictive, and may be insufficient if you use an
expensive computer and software, photo-copier, fax machine etc. the cost of
replacement can quickly run to several thousand pounds. In such cases itís
prudent to take out specialist policy; it neednít be expensive, premiums start
at less than £200 or so for cover worth up to £8,000. You will almost certainly
need separate insurance for portable office equipment, like mobile phones and
Many people are concerned that theyíre not
organised enough to work from home, and will spend all day raiding the refrigerator,
or watching TV. In fact home-working is entirely self-regulating, if you donít
work, you donít get paid; bills and final demands are great motivators! Most
people quickly develop a routine. Some find it hard break completely from office
life and continue to put on a suit and tie each morning, before commuting to a
back bedroom. Others change their working patterns to suit their lifestyle, and
if that means getting up at midday, working in their pyjamas, taking Tuesdays and
Wednesdays off and working at weekends until 3am, then so be it, itís your
Doís and Doníts
* Create a well-defined workspace, try to
keep your business separate from your home life
* Beware of Ďcabin-feverí, working from home
can get very lonely, itís easy to become obsessed and over-do it. Maintain personal contacts and try and get out as
much as possible.
* Get an accountant, donít try and do your
own tax returns
* Get advice on pensions and mortgage insurance.
Home working can involve the loss of may important safety nets, if you become
ill or run out of work
* Check with your local authority, Job Centre
or training and enterprise council about the availability of grants, financial
assistance and training schemes for small businesses, you might be lucky, but
donít bank on it. Resources are tight, conditions are restrictive and the
” R. Maybury 1995 2303