Sole trader, Limited Company or what?

[AndyJ01]

I guess most 'hobby beekeepers' start with no intentions of anything other than having a go at keeping bees. After a few years they might find themselves with quite a few hives, selling quite a bit of honey and realise they should probably be declaring this activity. But the kit and colonies they have gradually acquired is now worth quite a bit of money, none of it supported by any invoices. Can they offset these historic costs in some way? (Asking for a friend!)

 

[Nige.Coll]

I guess most 'hobby beekeepers' start with no intentions of anything other than having a go at keeping bees. After a few years they might find themselves with quite a few hives, selling quite a bit of honey and realise they should probably be declaring this activity. But the kit and colonies they have gradually acquired is now worth quite a bit of money, none of it supported by any invoices. Can they offset these historic costs in some way? (Asking for a friend!)

No receipts or invoices then you have no proof of expenses.

 

[polymath]

@colinlyne - From my below post, maybe you will understand how even a small hobbyist needs to understand the tax implications!

This thread has turned into a very useful one for me. As I am such small fry I hadn't considered that I was near to having to pay tax. I took honey off mainly two hives last year and netted a gross income a little under £1000. That's just from two hives in what many report as a bad year! I have not even started looking at selling wax / wax related products which would obviously bring in a little more.

I have 5 hives going into this year so can cautiously expect to double my gross income this year - that will put me into tax paying territory.

So, to my question - do I have to now set up as a sole trader or ltd company or can I just fill in a Self Assessment form and pay what's due or does that amount to the same thing as being a sole trader?

Also, if I need to set up as a sole trader has anyone got a link to a useful resource page for such things as I don't want to get tax type things wrong and where do I go to register as a sole trader?

Sorry for the daft questions, I am just a PAYE employee that has got a 'successful' hobby.

See documents I posted earlier that explains it all.

 

[polymath]

I guess most 'hobby beekeepers' start with no intentions of anything other than having a go at keeping bees. After a few years they might find themselves with quite a few hives, selling quite a bit of honey and realise they should probably be declaring this activity. But the kit and colonies they have gradually acquired is now worth quite a bit of money, none of it supported by any invoices. Can they offset these historic costs in some way? (Asking for a friend!)

If you are using the £1,000 limit no. If you set up as a Limited Company yes you can 'sell' the equipment at a 'fair price' to the company. If set up as a sole trader no, as you can only offset in the year of the purchases.

 

[polymath]

Can anyone clarify? My understanding that the HMRC £1000 hobbyist allowance was for income, not profit.
Could offset a lot of expense against total income to reduce profit (or make a loss) but I think this is outside of the hobbyist scheme? Thanks

No not on the HMRC £1k income model, yes on the company structure.

 

[Apple]

Following the comments on another thread, what are the general thoughts on how you would run a small beekeeping business?
I run mine as a Sole Trader because I didn't want to jump through all the hoops of a running Limited Company but what do others do?

Shared all of this with a friend who ran a million +++ pound business as the senior accountant in the tobacco industry before retirement... now has a couple of colonies of bees.

He said... do you want to keep bees or let the bees keep you !

Then advised me against buying the Monster Unimog with a flat bed that I was coveting........

 

[Nige.Coll]

Shared all of this with a friend who ran a million +++ pound business as the senior accountant in the tobacco industry before retirement... now has a couple of colonies of bees.

He said... do you want to keep bees or let the bees keep you !

Then advised me against buying the Monster Unimog with a flat bed that I was coveting........

There is a big difference between keeping bees and the bees keeping you.

 

[B+.]

I guess most 'hobby beekeepers' start with no intentions of anything other than having a go at keeping bees. After a few years they might find themselves with quite a few hives, selling quite a bit of honey and realise they should probably be declaring this activity. But the kit and colonies they have gradually acquired is now worth quite a bit of money, none of it supported by any invoices. Can they offset these historic costs in some way? (Asking for a friend!)

If they are starting a business, you just write an invoice to "sell" the assets to the business. Of course, this means ownership of the assets is transferred so you won't own them anymore. If something goes wrong, you could lose everything it took years to build up.

 

[pargyle]

If they are starting a business, you just write an invoice to "sell" the assets to the business. Of course, this means ownership of the assets is transferred so you won't own them anymore. If something goes wrong, you could lose everything it took years to build up.

Better to retain ownership and lease them to the limited company for a sensible rental amount every year you thus retain the personal asset and just declare the rental income in your self assessment. Over a period of years you will have generated the value of the asset - if you reinvested the rental income into more hives that you then lease to the company you can grow without having the asset on your balance sheet. You would lose the 25% annual write down allowance but if anything went belly up your main asset is safe. Once the enterprise is up and fully running (and demonstrated to be financially viable) you could then sell some or all of the hives (or any other equipment owned by the sole trader) to the company. You would also lose the VAT reclaim but in the early days you may not be VAT registered ... it is a PITA for a small enterprise.

 

[AndyJ01]

Thanks, this isn't a full on commercial enterprise just an interesting and developing hobby. I'll have to see what invoices for historical assets can be found and be a bit more diligent recording the annual consumables.

 

[polymath]

No receipts or invoices then you have no proof of expenses.

if you own the equipment and are selling it to a company you do not need invoices/receipts. the equipment is valued at 'Fair Market Value' you can do this yourself and HMRC will not object generally is my understanding. It is easy through Ebay and other sites to see what second hand equipment sells for, you might be 'generous' on your pricing a little, just don't be stupid. Don't forget a good time to do this is in the Spring, think how much a Nuc sells for and thus your bees have value as well.

 

[sean-a]

Thanks for the info - I wasn't look to skim anything myself (or for a friend!), more like trying to understand what's the best way to record and provide evidence should it come to it. I guess I partly answered my own question earlier, in that iZettle does allow you to record cash transactions as as well as process cards, so technically you could put all income through them for a single point of (dated) reference. Obviously more phaff than a notebook I that use now and anyone with a few K £ stuffed through their letter box each year could spend more time online than restocking their sales stall, but worth considering going forward.


A couple of nice articles - just as a point of interest could anyone clarify "as a sole trader and you lose money one year those losses cannot be carried forward" - having filled in a few SA forms in the past, I thought there was a mechanism to do this for a SA 'business' ?

It might also be worth mentioning that a legit SA business claim for the actual expense option is for incurred mileage allowance, although there's a recommended recording method for that IIRC with a dated notebook for milometer readings etc -

I think that losses can also be offset against other income, so if you are part time you can offset any losses against income and reduce your taxbill

 

[Boston Bees]

I think that losses can also be offset against other income, so if you are part time you can offset any losses against income and reduce your taxbill

In theory, yes. But in practice, good luck getting HMRC to agree to that.

 

[pargyle]

In theory, yes. But in practice, good luck getting HMRC to agree to that.

Yeh ... after jumping through a zillion hoops ...and having to justify every last penny you have spent in order to incur the loss and they won't let it go on year after year - bear in mind it is not a viable business if you contunually have to fund it out of other income or savings...huge corporations may get away with it but HMRC find small and medium enterprise a very easy target for their investigations.