Sole trader, Limited Company or what?

[B+.]

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?

The most appropriate form of business for most small-scale beekeepers is undoubtedly as a "sole trader"

No, they have better than that - they have computer programmes that they input your sales, costs and expenses etc. and it works on algoryhthms that generate what it considers as anomalies ... they look for these 'anomalies' and investigate those. Based on all the accounts they see every year from businesses in that sector.

I have a friend who owned a fish and chip shop ... mostly cash business ... he generated a reasonable profit and paid his taxes ... but he skimmed a nice bit of income off the top. The Revenue investigated ... they knew ... they went back years ... 10,'s of thousands in back tax and interest, 10's thousands in penalties, a further huge cost as they insisted on a nominated independent accountant to carry out an audit which he had to pay for ...

Never ever underestimate the Inland Revenue, they have turned over enough stones in the past to know which ones to turn over and what they expect to find under them.

Every accountant knows that cash-based businesses are more likely to risk. Auditors will do substantive testing on the system but still look at variance between accounts and previous reporting periods. I remember my "Audit" lecturer saying that 5% variance warranted further investigation. Even if you get a "true and fair" statement from your accountant, HMRC may pick a business at random to investigate.

 

[Nige.Coll]

I went sole trader.
Then went VAT registered and claimed back the VAT on start up costs. Most of everything I sell is zero rated so it's going to be a long relationship of them giving me money back.
As the majority of the honey is sold in bulk it's really simple for accounts purposes.
I use quickbooks now as that makes life really simple. £12 per month fees.
Everything is accounted for in and out.
I have been told to expect a VAT inspection but that doesn't bother me as it is all above board. If anything they would owe me money.

 

[CaptainCymru]

I went sole trader.
Then went VAT registered and claimed back the VAT on start up costs. Most of everything I sell is zero rated so it's going to be a long relationship of them giving me money back.
As the majority of the honey is sold in bulk it's really simple for accounts purposes.
I use quickbooks now as that makes life really simple. £12 per month fees.
Everything is accounted for in and out.
I have been told to expect a VAT inspection but that doesn't bother me as it is all above board. If anything they would owe me money.

In fact .....super like

 

[B+.]

I went sole trader.
Then went VAT registered and claimed back the VAT on start up costs. Most of everything I sell is zero rated so it's going to be a long relationship of them giving me money back.
As the majority of the honey is sold in bulk it's really simple for accounts purposes.
I use quickbooks now as that makes life really simple. £12 per month fees.
Everything is accounted for in and out.
I have been told to expect a VAT inspection but that doesn't bother me as it is all above board. If anything they would owe me money.

I am a Quickbooks pro adviser and have beta-tested quite a few releases before they hit the market. It's a very good product and I would certainly recommend it for a new business. Having a well known system will certainly score points with your accountant as he/she's likely to have in-house experience and can do some of the Accountant-specific tasks (Journal entries, etc). I've been VAT inspected myself and they focussed more on whether products/services had been correctly coded (i.e. what rate they attract) but may go back over a number of years. Even though I know what I'm doing, I had incorrectly coded bank charges but they decided the amount concerned was insignificant and just asked me to correct it for the future - no problem!
You are absolutely right to use a well known system. This gives accountants/HMRC the confidence that, so long as items are coded correctly, the accounts will usually be correct. The difficulty comes when business owners don't know the accounting standards and miss-understand what is required. Quickbooks is good for online submissions too but could explain prepayments/accruals better - although most small businesses will usually operate on a cash-basis.

 

[Apple]

I am a Quickbooks pro adviser and have beta-tested quite a few releases before they hit the market. It's a very good product and I would certainly recommend it for a new business. Having a well known system will certainly score points with your accountant as he/she's likely to have in-house experience and can do some of the Accountant-specific tasks (Journal entries, etc). I've been VAT inspected myself and they focussed more on whether products/services had been correctly coded (i.e. what rate they attract) but may go back over a number of years. Even though I know what I'm doing, I had incorrectly coded bank charges but they decided the amount concerned was insignificant and just asked me to correct it for the future - no problem!
You are absolutely right to use a well known system. This gives accountants/HMRC the confidence that, so long as items are coded correctly, the accounts will usually be correct. The difficulty comes when business owners don't know the accounting standards and miss-understand what is required. Quickbooks is good for online submissions too but could explain prepayments/accruals better - although most small businesses will usually operate on a cash-basis.

Barclaycard Ingenito and Izettle and Paypal can all link up with Quickbooks... Highly recommended, have been using since its release, the helpline is fantastic as they can securely take over the pages and correct the problems.

As for CASH..... 90% of the honey sales at the Christmas markets last year.... were "contactless"..... at 2m distant of course ( Now known as the Boris distance)

At the last Royal Cornwall show the then ( and there was a number of them in and out) Farming minister ( Not George E who is a typical Tory absentee landlord) told me that VAT was a subsidy for farmers, and not to expect anything to help the struggling Beefarmers in the UK IF WE LEFT THE EU!!!

Must admit I have not seen any benefit from leaving as yet!!!

 

[B+.]

Barclaycard Ingenito and Izettle and Paypal can all link up with Quickbooks... Highly recommended, have been using since its release, the helpline is fantastic as they can securely take over the pages and correct the problems.

As for CASH..... 90% of the honey sales at the Christmas markets last year.... were "contactless"..... at 2m distant of course ( Now known as the Boris distance)

At the last Royal Cornwall show the then ( and there was a number of them in and out) Farming minister ( Not George E who is a typical Tory absentee landlord) told me that VAT was a subsidy for farmers, and not to expect anything to help the struggling Beefarmers in the UK IF WE LEFT THE EU!!!

Must admit I have not seen any benefit from leaving as yet!!!

You illustrate my point very well. When I said cash accounting, I meant cash basis (treating income/expenditure when it occurs) rather than accrual basis (treating income/expenditure when it is due). I did not mean physical cash because, as you said, there are numerous ways to pay now that do not require physical cash to exchange hands. I was using accountants terminology.
I obviously wasn't there so didn't hear that particular quote, but, VAT is anything but a subsidy. Even if you're able to reclaim VAT, there is still the timing effect between buying the item and reclaiming the VAT on it. So, in effect, it has cost you something - by increasing your working capital for the period the money was outstanding.

 

[Apple]

You illustrate my point very well. When I said cash accounting, I meant cash basis (treating income/expenditure when it occurs) rather than accrual basis (treating income/expenditure when it is due). I did not mean physical cash because, as you said, there are numerous ways to pay now that do not require physical cash to exchange hands. I was using accountants terminology.
I obviously wasn't there so didn't hear that particular quote, but, VAT is anything but a subsidy. Even if you're able to reclaim VAT, there is still the timing effect between buying the item and reclaiming the VAT on it. So, in effect, it has cost you something - by increasing your working capital for the period the money was outstanding.

Paul... nice to see you back on pace!

Understand the accountancy terminology... was attempting to put it in the vernacular!
The then Farming minister asked me what he could do for Beefarmers... I suggested a subsidy for all of the free pollination we provide... then he mentioned VAT !

Keep up the good work... UK bees need improving... from whatever stock you choose!

Yeghes da

 

[B+.]

Paul... nice to see you back on pace!

Understand the accountancy terminology... was attempting to put it in the vernacular!
The then Farming minister asked me what he could do for Beefarmers... I suggested a subsidy for all of the free pollination we provide... then he mentioned VAT !

Keep up the good work... UK bees need improving... from whatever stock you choose!

Yeghes da

I appreciate that Dave. It's nice to hear some open-minded comments on here.

 

[Hans wilson]

So true ... unfortunately, you find that you have to turn over at least three times what you can manage on your own in order to employ one person ... and in order to turn over three times what you can manage on your own - you need to employ FOUR people .. and an accountant .. and and and ... it's quite a massive leap from being a cottage industry, one man band, to becoming a Small to Medium Enterprise. You often find that rather than it becoming more profitable it becomes less profitable, the admin you then require adds to the hours you are doing and the additional costs do eat into the profits. It's easier to cut back to the bone if you need to in the years that don't meet your expectations - when there is only you to feed. When you have employees you face bigger responsibilities ... it's very hard to tell people you can no longer employ them.

 

[Hans wilson]

100% Also known as the rule of diminishing returns

 

[polymath]

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 -

No you do not carry forward losses where as a limited company yes you can under UK tax law.

 

[polymath]

I can guarantee without fail that they didnt magically pick them up , it would have been the age old British tradition of green eyes somewhere followed by a phone call

See article i posted above with attachement you can sell up to £1,000 and still be fine.

 

[CaptainCymru]

See article i posted above with attachement you can sell up to £1,000 and still be fine.

Aye thatl be my plan ,I'm only in it for pleasure and hobby,mainly to cover my costs

 

[ericbeaumont]

As for CASH..... 90% of the honey sales at the Christmas markets last year.... were "contactless"

Same here; makes life easy, and the nuisance now are the 10% who want to pay cash. I delegate trips to the bank to my daughter.

 

[madasafish]

I registered my income from honey with HMRC. Took the £1,000 deduction. My total honey income was just under £2,000 and as I advertise and have a sign up, the filing is worth it for peace of mind.

The benefit to HMRC is minimal

 

[colinlyne]

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?

I always thought that this forum was about beekeeping, not business. I keep bees because I like to do so, not to make money!

 

[pargyle]

I always thought that this forum was about beekeeping, not business. I keep bees because I like to do so, not to make money!

But ... it's a hobby that, for some people, grows and if you get to 15 or 20 hives (or some hobbyists have more) then you could be looking at a tonne or more of honey - whilst it is nice to keep bees - what are you going to do with that amount of honey ? I've got 7 colonies - will probably be 10 this year and as all my kit is paid for and my hives are in the garden I could, for the first time, be looking at a few pounds of profit above the £1000 hobbyist allowance.

It may not interest you exploring the potential for running it as a business but I'm sure, judging by the number of views this tread has generated, that it is of interest to a large number of people. The forum is a broad ranging one ... sometimes threads branch out to some esoteric subjects but .. you can just mark them as read and move on if it is something that does not appeal.

 

[Jimmy]

I always thought that this forum was about beekeeping, not business. I keep bees because I like to do so, not to make money!

You don't have to sell that much honey to exceed the £1000 turnover limit at which you need to declare. At £5 per 12oz/340g jar, that's only 150lb honey which is easily achieved off a couple of hives in a good year.

 

[ics19]

No you do not carry forward losses where as a limited company yes you can under UK tax law.

Thanks for confirming. Just to say I haven't tried to claim any loss, but I did look back at my last SA and double checked on the "carry forward losses" aspect - there is a box and associated help says:
You can carry your loss, or the amount of loss remaining unused, forward to set against future profits
from the same business. The loss is deducted from your profits in that business in the first and each
subsequent year until it is used up.
The time limit appeared to 4 years for this. Do you know what this is for or why it's not relevant to a beekeeper individual business?
I googled the loss aspect (a bad thing I know ) and these came up:
BIM85060 - Business Income Manual - HMRC internal manual - GOV.UK
Self assessment - losses carried forward

 

[gmonag]

Most beekeepers make some income from hive products. It is a good idea to be aware of the consequences.