Answers so far not strictly true (except Soupy's-pack it in

)
The terms of his lease or mortgage MAY prohibit customers coming to his house.
Like if he was running a bike workshop from the garage, customers would be coming and going, perhaps parking on the road, perhaps at unsociable hours.
This needs permission. It changes the use of a domestic home to business use.
Doing WC does not count. The water production is almost negligible and the clerical aspect is always permitted.
It doesn't have anything to do with his neighbour, correct, but he could be a snivelly little weasel and blab to the rental people or bank/BS who it does have something to do with.
Your mate might do well to dig out his mortgage terms (or lease/rental agreement) and clarify his terms.
He could tell his neighbour to 'do one' but in my experience it's always better to be at least polite, as you've gotta live next to 'em.
Saying 'thanks for your concern, I wasn't 100% sure what I was allowed to do. I've checked my paperwork and I'm fine. Thanks for the heads up though' will do much more for the neighbourly relationship than 'Sod off you nosey git'