Setting up a honey business

[Sir Quej]

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.

Thats pretty much what capital allowance is. When declaring as a sole trader, there is no business to "set up" as such. As someone has already pointed out, the profit can be declared on your self cert declaration. I operate two sets of sole trader accounts (one as part time plumber and one as a part time beek). Both are declared as per above. The cost of any assets is just treated as a cost, not a depreciating asset. If I make £500 from honey but spend £300 on a hive and tools, I declare £200 profit and pay tax on that.

As I said earlier, this year I will report a loss of over £1000 as I dont have any honey to sell. This loss is purely buying hives, tools, sugar, bees, other equipment and 45p per mile for any mileage where I use my car.

Next year, I wont have as much to buy and hopefully some honey to sell so will hopefully record a profit.

Dont forget your mileage guys, it can make a big difference at 45p per mile (assuming you can use the HMRC's EMAP rates).

 

[Sir Quej]

and of course losses couldn't be claimed.

It most certainly can, and should. you dont "claim" the losses as such but they can be offset against your personal tax if you also have a full time job like I do.

You do end up getting a tax rebate.

 

[itma]

I'd stress the importance of consistency.
If its a business for VAT, it needs to be for Income Tax, etc, etc ... "Trade waste" can be a problem. And do check your car insurance - does it exclude "use in connection with any trade or business"? And I'd advise that you don't give any part of your home exclusively over to 'business use' - there be dragons (Capital Gains Tax, Business Rates, etc.)

If you fancy being a business, you need to do it pretty whole-heartedly. Its not just a matter of filling in a couple of forms and getting the vat knocked off a couple of hives ...

 

[psafloyd]

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 can you possibly declare it as a business, Sir Quej? You only have three colonies according to your profile.

 

[alldigging]

If you fancy being a business, you need to do it pretty whole-heartedly. Its not just a matter of filling in a couple of forms and getting the vat knocked off a couple of hives ...

The vat also includes an eu vat form .. a mystery to me though.

 

[psafloyd]

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 !

Yes, IF it is being run on a commercial basis, ie to generate excess returns.

I have had six hives this year with 2.5 producing colonies (half was a swarm from halfway through the season). That is a hobby, not an enterprise.

Even 20 hives is not really a business as you have little chance of generating any meaningful revenues –*you certainly couldn't support yourself, though tax me due on sales. However, once depreciation, sales, marketing and labour is deducted, you'd be hard pushed to show any profit.

 

[alanf]

How can you possibly declare it as a business, Sir Quej? You only have three colonies according to your profile.

Maybe the paperwork is part of the enjoyment?

 

[psafloyd]

Maybe the paperwork is part of the enjoyment?

Must be a masochist, then...

 

[drstitson]

Italy has a new supercomputer which is trawling through bank accounts.

this is especially relevent since last september when a new prescriptions exemption/discount system came into force and meant people had a month to declare household incomes. Millions (5 i think) declared £0.

re beeks - they have a fairly generous allowance for country/mountain folk to sell produce and not have to deal with tax/vat etc.

as far as HMRC are concerned the odd sales of by-products of a hobby aren't trading. BUT actively producing, for the market, in any quantity, is trading, no matter how small. so in theory anyone selling honey and making more than it costs should declare it on tax form. full stop. HMRC are clear.

they'd probably argue that having legal labels for jars indicates trading. likewise registering with TS.

 

[ROACHMAN]

Yes, IF it is being run on a commercial basis, ie to generate excess returns.

I have had six hives this year with 2.5 producing colonies (half was a swarm from halfway through the season). That is a hobby, not an enterprise.

Even 20 hives is not really a business as you have little chance of generating any meaningful revenues –*you certainly couldn't support yourself, though tax me due on sales. However, once depreciation, sales, marketing and labour is deducted, you'd be hard pushed to show any profit.

Its pretty easy to make money from bees with 20 hives. Once the initial equipment has been purchased the variable costs are small (sugar, apiguard, oxalic acid etc).

If a loss is made (likely in the 1st year) it can be offset against income from your main job and a tax rebate will be winging its way (thats what happened when I set up my gardening sideline).

Plus there is the reclaim of VAT to consider.

So basically it could make financial sense to treat the hobby as a business and at least you can sleep easily at night knowing you arnt going to get an unwelcome visit from HMRC

ANY profit on selling honey however small has to be taxed in the eyes of HMRC regardless of if its a business or not, like someone has pointed out it doesnt need to be a limited company, any profit/loss can just be added to the annual tax return but my initial question was about accounting for depreciation on hives (or capital allowancess).

 

[Sir Quej]

How can you possibly declare it as a business, Sir Quej? You only have three colonies according to your profile.

The amount of hives and the amount I earn doesnt come into it tbh. I work in finance/accounts and therefore can not run the risk of not declaring any income I earn regardless of the amount. My company do financial checks on us every year and for me to have on my record that I had not declared income (regardless of the amount) would cost me my job.

Declaring my 1st year costs just goes hand in hand with that. Yes, I'll get some tax back this year but will pay tax on the income I earn from honey sales next year (all being well). Unfortunatley, in my situation EVERY penny that I earn through whatever source, has to be declared.

And no, I dont enjoy the paperwork......lol

 

[Chris B]

Its pretty easy to make money from bees with 20 hives.

True. Easier than 40 or 60 actually. That's when you run out of "free" time and encroach upon "work" time which is expensive. Travel costs increase, family forbid kitchen extraction, average hive yields decrease, and you've surpassed your retail ceiling so you're earning less for your honey.

 

[Tim1606]

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......

What Law???? Show me in black and white.

We have been checked by the environmental health and we have been awarded a five rating (the highest) and we extract in the kitchen.
No spot inspection if you are running from home as they have to make an appointment with you.

 

[Tom Bick]

at least you can sleep easily at night knowing you arnt going to get an unwelcome visit from HMRC

They can inspect you at any time and even if you are 100% legitimate

They will suspect you guilty until you prove yourself innocent. They will go through all your business and personal expenditure over the period they are looking at and this can take a few meetings and stupid questions to answer. You can get an insurance to cover tax inspections as they can be involved and time consuming and expensive especially if you let your accountant to deal with it.

 

[drstitson]

"We have been checked by the environmental health and we have been awarded a five rating (the highest)"

the ratings are now published on the web - very interesting reading for consumers of takeaways.

presumably HMRC will be doing regular trawls of the data to pick up undeclared businesses.

 

[Tim1606]

"We have been checked by the environmental health and we have been awarded a five rating (the highest)"

the ratings are now published on the web - very interesting reading for consumers of takeaways.

presumably HMRC will be doing regular trawls of the data to pick up undeclared businesses.

We have no worries as we are a declared business.

 

[drstitson]

tim - wasn't aiming the comment at you BUT rather warning others that you can't expect to register a "business" interest with one arm of authority whilst ignoring any obligation towards another.

obviously those who've registered their kitchens as catering premises so that they can make cakes etc SOLELY for sale by local schools, churches etc. for fundraising purposes would be in the clear (although would probably still cause a bit of hassle and maybe some embarassment having to get headteachers and vicars to provide signed statements to confirm situation - presume keeping diary/order books would be order of day, especially as TS probably require batch info etc etc recorded).
as i said before, registered premises and TS/EU spec labels for your honey and hive products implies trading.

DOI: to date my only "trading" has involved buying in foundation sheets and donating candles to local nursery school for emergency fundraising. all of last years' honey was for personal use or gifts to close family.

 

[Hebeegeebee]

If honey sells for about £10 per kg and you get 300 kgs from 20 hives, that's enough money to make the tax man interested.

When setting up a business formerly it may be possible to buy your hives from your wife - then they are a business expense rather than 'something you already had' that could not be offset against income. You'd need to be careful and be able to prove that the hives were actually bought by wifey. If she had bought you some stuff as a present, then she would have a receipt and therefore it could be legitimate. Need an accountant.

 

[Margaret Elisabeth]

Input Hobby HMRC in search bar it brings up the tax man's view on income and hobbies.
I think that putting a professional standard label on your jars may well mean the view will be this is a business. So if you are selling in places where this is a food standards agency requirement then I would include the income and expenditure on your tax return. Now my next problem in my new "Hobby" will be how do I dispose of all that surplus honey. If I put a sign at the end of the drive "Honey for sale" that may well take me in to the realms of business with all it entails. Income tax, change of use planning permission, increased council tax, premises inspectors, health and safety. And I thought my biggest problem would be getting my bees through the winter. Aaaarrrrg.

 

[itma]

... Now my next problem in my new "Hobby" will be how do I dispose of all that surplus honey. If I put a sign at the end of the drive "Honey for sale" that may well take me in to the realms of business with all it entails. Income tax, change of use planning permission, increased council tax, premises inspectors, health and safety. And I thought my biggest problem would be getting my bees through the winter. Aaaarrrrg.

Welcome, Margaret Elizabeth!

And don't worry.
Getting the "surplus honey" comes before paying tax on it!

The advice has to be to keep records of all expenditure. Painful in itself, and painful to see the cost in black and white.
But if you have records of all the costs - the training, the mileage incurred for that, the equipment, the bees, the sugar ... - then you can see when you go into profit and when reporting your activity to HMRC becomes relevant.

They don't want you offsetting your loss-making pastime against general income -- so until it is profitable, they'd really rather not know!
But when it does become profitable, they have a right to take an interest, and even a tithe. In order to demonstrate the loss-making years that you generously chose not to trouble them over, you need those cost records. So start right at the beginning filing away those invoices, and buying the sugar on its own till receipt.