VAT Registered

[BMH]

I came across a post talking about becoming VAT registered so you can claim back all of your outgoings in relation to bee keeping.

As honey is zero VAT rated you dont need to charge it on your sales.

Does anybody do this?

I can only see the positive of 20% off everything?

 

[B+.]

I can only see the positive of 20% off everything?

You have to keep track of it all and report it in a special format to HMRC (there is software that can help with this though)

 

[BMH]

You have to keep track of it all and report it in a special format to HMRC (there is software that can help with this though)

Yeah, I kinda like to do that anyway. I am a Project Manager so am used to keeping records!

Do I need to register as a sole trader?

 

[midnight sun]

I came across a post talking about becoming VAT registered so you can claim back all of your outgoings in relation to bee keeping.

As honey is zero VAT rated you dont need to charge it on your sales.

Does anybody do this?

I can only see the positive of 20% off everything?

No expert on finance, but with 4 hives according to your avatar, do you expect to bring in over £20,000 per year? Seems to me you would just be a tax collector for the government with no benefit. Sole trader sounds best to start with in my opinion, then see how things go. Could be making a rod for your own back with VAT. Just my opinion.

 

[BMH]

excuse my ignorance, but what has £20k got to do with anything?

I doubt I will ever turn a profit, its just my hobby, but would mean I could get 20% back on any spend that is related to my hobby.


I've probably spent around £1k in the past year.

I'd be happy to spend any profit on building up kit, new hives etc to a point where Im happy with the amount of hives I have. I would then de-register for VAT

 

[midnight sun]

excuse my ignorance, but what has £20k got to do with anything?

I doubt I will ever turn a profit, its just my hobby, but would mean I could get 20% back on any spend that is related to my hobby.


I've probably spent around £1k in the past year.

I'd be happy to spend any profit on building up kit, new hives etc to a point where Im happy with the amount of hives I have. I would then de-register for VAT

Oh......just curious!

 

[BMH]

Ah, I thought it was a special number or something.

My understanding is that is if your turnover is £70k (or more) then you MUST register for VAT but you can register if you want regardless of turnover and is obviously beneficial if the only item you sell is zero rated for VAT.

The tracking of expenses, spend, sales etc isnt an issue for me. I enjoy updating spreadsheets and am organised with receipts and invoices.

I cant see any negatives really considering I am happy to balance the books by investing any profit into new kit. If I got to a point where I was turning a profit and didnt want to expand any further I would close the company. Wouldnt fancy paying 40% tax on my profit!

Anyone have any experience of this?

 

[B+.]

excuse my ignorance, but what has £20k got to do with anything?

The treshold for compulsory registration for VAT is £83,000 but you can register voluntarily.
VAT isn't intended to reduce the costs of your hobby. Its a tax where the end buyer pays. Everyone else in the chain acts like a tax collector.
I would urge caution when dealing with HMRC. Any profits you made would be added to your Non-Savings Income and be taxed under the Income Tax system

 

[BMH]

The treshold for compulsory registration for VAT is £83,000 but you can register voluntarily.
VAT isn't intended to reduce the costs of your hobby. Its a tax where the end buyer pays. Everyone else in the chain acts like a tax collector.
I would urge caution when dealing with HMRC. Any profits you made would be added to your Non-Savings Income and be taxed under the Income Tax system

But correct me If I'm wrong, there isn't any tax to be paid on honey sales?

I wouldnt be doing anything illegal. I would work out my annual profit and reinvest in new kit in order to avoid paying income tax on any profit/wages.

Not sure what their view would be when it comes to winding up the company.

 

[B+.]

But correct me If I'm wrong, there isn't any tax to be paid on honey sales?

You're wrong. If you make a profit as an individual, it will be added to your income and you will pay income tax. If you were a company, you would pay corporation tax.
There is no free lunch

 

[clv101]

I've wondered this over the years but never looked into it. Why doesn't every small time amateur beek register for VAT, make a saving on beekeeping equipment but not have to charge any extra on honey sales?

 

[BMH]

You're wrong. If you make a profit as an individual, it will be added to your income and you will pay income tax. If you were a company, you would pay corporation tax.
There is no free lunch

If you read the next line down.

I would plan to invest any profits into new kit so I would ensure I never turn a profit.

And that reference was to VAT on honey sales.

This is all hypothetical at this stage.

I am just trying to understand the implications.

 

[BMH]

I can see why many would be put off.


1. keeping track of everything
2. not wanting to expand meaning they would be taxed on any profit

Neither of these issues are a problem for me.

Anyone think of anything else?

 

[BMH]

I've wondered this over the years but never looked into it. Why doesn't every small time amateur beek register for VAT, make a saving on beekeeping equipment but not have to charge any extra on honey sales?

a 20% saving.

You could think of it as a government subsidy for doing something decent with your spare time!

 

[jenkinsbrynmair]

I've wondered this over the years but never looked into it. Why doesn't every small time amateur beek register for VAT, make a saving on beekeeping equipment but not have to charge any extra on honey sales?

You've got it in a nutshell - if you're under the threshold then you are a voluntary trader - HMRC don't have to allow you to register and if you claim you are a hobbyist then you are not a trader. Every penny you take in will become income thus you are liable to to tax and NI.
Believe you me the returns are a PITA.
To think you can be VAT registered just to claim back a bit of cash on your (comparatively) small outlay is being naiive in the extreme.

 

[BMH]

But I would like to quite rapidly expand my operation.

What is a hobby now, could become more serious later on, or it may not.

It seems a shame not to get the VAT back if I am expanding. And any sales wouldnt be subject to tax and NI if the money was reinvested in the same tax year on expansion (correct me again if I am wrong on this)

I enjoy tax returns!

 

[BMH]

my question remains, what would happen if i got to a point where I had, say 30 hives, and didnt want to expand.

If I wound up the business, do I pay tax on my assets?

That would obviously make it a non starter

 

[chrisb]

To become VAT registered you would first have to register yourself as a business, this can be self employed ( sole trader ) and open a bank buisness account
one that is done you would have to register for voluntary VAT registration, VAT registration is mandatory on turnover of over £83.000 PA
being self employed you will have to keep accounts, with being vat registered they have to be above simple accounting as you also have to record all VAT separate
you can only recover VAT from purchases from VAT registered businesses, and only on goods that are directly linked with your business and for use within the business
as you say Honey is zero VAT if sold direct the jar due to it being for the containment of the product falls into the same class as the contents thus vat exempt. if you sell the product in a ceramic serving bowl type container or a container that can have a decorative nature ( Ie honey bear or bee shaped ) the container is subject to VAT
once registered every quarter you will have to fill a VAT returns form, this shows purchases ex vat, vat part of the purchases, sales ex vat and vat on sales. sales vat minus purchase VAT give amount you owe or claim back.
Any monies payed back to you belong to the business.
the thing to consider is this, at the end of the TAX year you have to submit accounts and you might have to pay TAX on any profit made
also if business is registered as BEE Keeper you would have to ensure all product is tested to meet food standards and a log of these kept

it all sounds good claiming VAT back you say you spent a mere £1000 this year so you could claim back £166.67 would it be worth it ?

if you used voluntary VAT to expand business and once it achieved a good profit level then closed said business then thats fine but if you continued the business you would be evading TAX

If you even as a hobby are making a reasonable profit from the hobby and reasonable profit would be determined by the HMRC ! not what you say and you do not declare this additional income thats TAX avoidance and that is not good

 

[pargyle]

But I would like to quite rapidly expand my operation.

What is a hobby now, could become more serious later on, or it may not.

It seems a shame not to get the VAT back if I am expanding. And any sales wouldnt be subject to tax and NI if the money was reinvested in the same tax year on expansion (correct me again if I am wrong on this)

I enjoy tax returns!

If there is one thing that HMRC hate it's people getting back more than they are giving them .. trust me - I've been there. Firstly, if you make any profit then you will have to pay tax on it .. if you make a loss, theoretically, you could offset the loss against the tax you pay on any other income - BUT and it's a VERY BIG BUT .. HMRC will crawl all over your finances, they will not trust the figures you provide, they will want to look at all your personal income and expenditure and will try to seek out every last cent that you might have inadvertently deprived them off and then tie you in knots with what could develop into a full blown tax investigation.

You may well be squeaky clean but they won't believe you - as a small trader and an individual you are an easy target - you will end up needing an accountant to justify your figures and they will still hound you to extinction.

So .. go for it . if you enjoy self flagellation and are an out and out masochist ! Me, jaded ? yes ! ... It is a number of years ago but the scars still bleed. Cost me a fortune in time and accountancy fees and in the end I had to settle with them as it became just too onerous and expensive to continue the argument.

 

[jenkinsbrynmair]

my question remains, what would happen if i got to a point where I had, say 30 hives, and didnt want to expand.

If I wound up the business, do I pay tax on my assets?

That would obviously make it a non starter

Unless you had a pretty sound business case and could demonstrate an immediate move to become commercial you would not be allowed to register full stop.
If you did get registered you could expect a visit within twelve months for verification and credibility checks
If you think you would just be allowed to stop being registered as soon as you raked in the repayments and continue to keep bees, dream on.
It would depend on the circumstances -
if it was obvious you were a chancer it could end up in prosecution.
I refer you to my previous statement.