Hi, let's hope we can give you a sensible answer. If anybody is running a business from a private address, it doesn't really matter what it is, then business rates should be paid, I think in addition to Council Tax (I may be wrong there).
You say that your husband is in the motor trade, and it seems from one of your answers that you think that a neighbour has reported that to the council. The council will have to act on the information is has received. If they think you are running a business from residential premises, they have to prove it.
It looks as though, at this stage, all they've done is send out a warning letter. If you respond to that saying what you've said earlier, then the chances are you'll hear no more about it.
If they do impose business rates and a fine, there is an appeals process.
I hope this helps