Working From Home Legal Victory

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The Times, October 20, 2003
Revenue relents on home workers
By Elizabeth Judge

MILLIONS of people working from home who have been threatened with
paying business property rates on top of council tax have won a
victory over the Inland Revenue after a landmark case brought by one
of its own employees. Eileen Tully, who works for the Revenue, mounted
a successful challenge against her employer's policy of threatening
people working from home with paying business rates as well as council
tax.

The Valuation Office Agency, the branch of the Revenue that assesses
properties for business rates, said it would not appeal the decision.
It also agreed to change its guidance to ensure that people working
from home, provided they are not running a full-scale business or employing
people on the premises, will not be penalised with extra tax.

The Tully ruling, eagerly awaited by freelancers, will end fears among
Britain's growing army of home-based workers that they would be
targeted by the Revenue.

More than two million people work from home. The practice has been
encouraged by the Government which has introduced liberal laws to
enable parents and others to follow flexible working patterns,
including homeworking.

But in recent years the Revenue has adopted a less than sympathetic
approach to the practice, singling out people conducting even minimal business
activity, such as using a room as an office with printer and fax for
example. People who were targeted continued to pay council tax but
were also forced to pay business rates on the part of the home they were using
for work.

In a further blow, any property considered as business premises faced
the prospect of attracting capital gains tax.

Employers, aware of the problem, began advising staff working from
home to place beds or domestic furniture in the room.

The case of Mrs Tully, who was backed by the Public and Commercial
Services Union, was typical. After being given permission to work from home,
because she suffered from a disabling back injury, she was supplied with a
desk, computer, printer and storage cabinet. No meetings were held at
her house and the room was still used for ironing and other domestic
uses.

Siding with Mrs Tully, the judge at the Lands Tribunal, where rating
cases are heard, said: "There must be very large numbers of homes in
the country in which those living there do some or all of their work,
without any outward indication that someone is working in the
property." He said a home should only be re-rated if the accommodation loses its domestic
character and where employees visit the premises.