Setting up a honey business

Any commercial bee farmers out there, I have some questions

My hobby as now grown to the extent that I am considering converting it in to a business to keep the tax man happy.

I have 20 hives with bees, the going rate seems to be about £300 each. I therefore have £6000 plus another £2000 of equipment.

On day 1 of the business am I able to bring in £8000 of fixed assets ?

What period do I depreciate the hives and bees over ?? I was thinking about 10 years (how long does a hive last - could be 100 years if looked after). or do you write off the bees in the first year and just depreciate the hive?

With depreciation charge of £800 for this year I recon ive made a loss of about £500 which can be offset against future profits

What about bee books, I must have about 30 of them, can I bring them into the business.

Seems a good idea to register for VAT as well in order to claim back on equipment purchases.

I'm only a novice beek but I am a chartered accountant so heres a few pointers.

On day 1 you will be able to bring onto your books all 20 hives, however if they were bought at some point in the past you would have a hard time justifying they are worth £8k. If you have purchase receipts to prove they were bought in the last year or so you may well be able to do so but I expect you will need to bring them on at a lesser figure to begin with to reflect the fact they are not brand new.

As for depreciation, this is not an allowable expense to offset against taxable profits, so you can forget about it right away to set the charge against your profits. Instead, HMRC provide relief in the form of capital allowances, which are calculated on the capital cost of your equipment but have nothing to do with depreciation. Full information on capital allowances is available on the HMRC website. How much you will be able to claim on your existing equipment will need looking into, but you would receive full capital allowances on all further purchases going forward.

If you do want to calculate depreciation for financial accounts (NOT taxable profits), you really can pick whatever time scale you wish, I would say 5-10 years would be a fair time scale. If you have fully depreciated it and are carrying it at a nil value in your books, you can continue to use the asset (common for many businesses).

VAT - normally this is only worth registering for if you are happy charging VAT on all of your sales. However you are fortunate because honey is zero rated, i.e. VAT is charged at 0% and hence you do not need to pass on any additional cost to your customers (where the standard rate of VAT would have required you to pass on a 20%). You will as you say enjoy a 20% saving on all of your purchases and as it is free to register, I would say yes go for it but you will need to keep appropriate records for completing your quarterly VAT returns 4 times per year.

Plenty of other things to be done - you will need to register for HMRC self assessment on income tax, you will be in a different national insurance bracket, etc.

Bottom line - go speak to an accountant and good luck

You may well find that the VAT inspector will take a view and you may not like it.

I would find a good accountant, look for reviews as some are rubbish, including national names, and take advice. Personally I think you are too small but go for it. Just remember professional fees mount up.

PH

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Find a professinal. Go to help him in his job. Then yo see what is professional working.

10 hives and 15 minitues time to take honey boxes off and empty on. Then go next yard.

500 hives. A round in 10 days. 50 hives in a day.

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Rob55 said:

Bottom line - go speak to an accountant and good luck

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It's a question for an accountant, not a beekeeper.

I don't think you can class a bee as a fixed asset?

I'm no chartered accountant or anything like but i do do management accounts for L&G and I also currently declare my beekeeping as a business (Sole Trader).

How you go about it with yours will be dependant on what type of business you want to set it up as. The accounts and how they are reported will differ depndant on whether or not you go Sole Trader, Partnership, Limited Company, VAT registered etc etc etc.

My own example as a sole trader is that I have no Fixed Asset Depreciation or anything like that. Anything that I buy is recorded for capital allowance. I also claim for other costs like car costs (not full cost, but an allowable amount).

This is my first year, so I will report a significant loss (no honey to sell), which will allow me to claim back tax but next year (all being well) I will report a profit. Any tax that I get back this year will be put back into the business anyway.

You really need to discuss it with an accountant to be honest.

I think depreciation would be around 3 yrs as locally second hand kit has little value.

Found this handy online booklet from DEFRA iro running what is essentially a farming/livestock-management enterprise:

http://archive.defra.gov.uk/foodfarm/farmmanage/advice/documents/def-of-terms.pdf

Good luck!
M

I think that anyone selling honey will need to consider setting up a business and paying tax on any profit. One or two hives and you could probably get away with it. I have 20 hives which could produce over 1000 lb of honey, this will lead to substantial revenues. I dont think HMRC will be turning a blind eye !

especially if you advertise the fact lol

presumably anyone who is employed but running their hives as an additional source of income just has to declare the untaxed income on their annual tax return like any other employees with other income sources.

there's no vat to sort anyway (on bees and honey) and no-one wants to pay more NICs then they need to.

In my opinion 20 hives is a hobby...... 500 hives is a business!

enrico said:

In my opinion 20 hives is a hobby...... 500 hives is a business!

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But what is the Tax mans opinion?

Chris B runs 300 hives and I would have thought both he and the tax man consider that a business

20 hives takes a serious amount of time.. and in the eyes of the Inland Revenue would be classed as a part-time business, not a hobby. The honey produced is going to be sold in a few shops - not just a few jars sold at the gate.
Sold Trader is different to a Limited Company as Sir Quej has mentioned.
Accounts don't have to be complicated but an accountant is really required to get things going properly at the start. Then it's probably an annual tax return which you can do yourself.

The govt is looking for revenue. Previous governments have borrowed from our childrens and our grandchildrens future earnings to bribe us to vote for them. (I wonder if your bank manager would allow you to borrow money for a party on the back of your unborn childrens future income?)

The govt debt is huge.

The Nation's debt is huge.

As a country, roughly 2 billion pounds leaves our shores every month more than comes in. We are therefore getting poorer as a nation as a result, there's less money to go around. Tens of billions leaves our shores just in interest payments annually to cover government debt (that's our debt).

The taxman wants that money!

Happy beekeeping!

Yes, I'm set up as a limited company. I pay about £1k a year for accountancy services and it's money well spent I reckon. I am VAT registered and I do get a small quarterly refund but more importantly I don't pay any VAT up front on EU purchases e.g. Sw**nty.

Up to 4 years ago beekeeping was a sideline, albeit a big one with about 150 hives, and I just used my annual personal tax return. And I made sure I never made a profit by buying enough new kit each year that no tax was payable. Not sure if it was depreciation or capital allowances that did the trick - I'd have to ask the accountant. I do know the value of the bees themselves never came into it.

chris - presume neither depreciation nor capital allowances.

if just declaring "profit" from your hobby then i'd imagine that all you'd needed to do was keep records of expenditure (with receipts) and receipts from sales. your personal income from the hobby would be any net profit. and of course losses couldn't be claimed.

drstitson said:

chris - presume neither depreciation nor capital allowances.

if just declaring "profit" from your hobby then i'd imagine that all you'd needed to do was keep records of expenditure (with receipts) and receipts from sales. your personal income from the hobby would be any net profit. and of course losses couldn't be claimed.

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I think that's probably right. From memory, in a small business, expenditure below a certain threshold can all be balanced against income to negate tax liability. Or did that change recently? (This is why I employ an accountant!).

You will need to get a nvq level 2 qualification in food,health and hygiene and you'll need to set up a honey house. Extracting in the kitchen is not up to standard. Most of us do, but by law if we are selling honey it should be extracted in a room fit for purpose. Your scales would also need to be calibrated. Just in case you get a spot inspection.

Lot of extra work......