The Cost of Breeding

[PSGeckos]

Perusing the US boards and came across a very open post on Kelli H's site about her turnover as they have to do there tax returns...
Mmmm wonder how many breeders this side on the pond are VAT registered???

Anyhow here it is:
The expenses of running a leo business - GeckoForums.net

We recently completed our taxes for 2007 (yuck) and the total expenses for HISS last year were $48,067.94. This includes advertising, animal maintainance (feeders, paper towels, deli cups, vermiculite, sphagnum moss, cleaning supplies etc.), bank service charges (credit card fees), equipment rental (credit card machine), freight (shipping charges and supplies), inspection fees (US Fish and Wildlife), licenses and permits (import/export license, business license), office supplies, building repairs (electrical modifications and equipment), storage fees (we store some of our supplies offsite), entertainment and meals (this includes the $100 alcohol purchase for the NARBC party last year!), motel (when we do out of town shows), utilities (since our business is run out of our home, we have to factor in a percentage of our utilities as business expenses), and veterinary expenses.
We took a loss of around $5,000.

Very refreshing post too see, i mean the openess of it and surprising to see how all the expenses add up!

[purejurrasic]

Dont have to be VAT registered unless turnover is over £62k I think.

[Young_Gun]

Originally Posted by purejurrasic

Dont have to be VAT registered unless turnover is over £62k I think.

£62,495 or above

Question for me though would be, why is HISS still trading after a loss of $5k?

[Synergy]

Originally Posted by Young_Gun

£62,495 or above

Question for me though would be, why is HISS still trading after a loss of $5k?

Because businesses do expect a loss at some stage... You can easily recover from...

They are only telling you what they have lost as a total for there supplies but they dont tell you the profit they made from what was sold etc....

( I think my dad does a similar thing with his biz but not 100% )

[Ssthisto]

Originally Posted by purejurrasic

Dont have to be VAT registered unless turnover is over £62k I think.

True, but HISS is located in the 'States, where they seem to expect you to report any income over $600 in a year...

[Athravan]

Hasn't it just gone up to 67k a year here too?

People should be declaring their income for income tax I believe, but even a lot of reptile shops and self employed people don't have to pay VAT here. I'm VAT registered and it's a serious pain in the butt!

A lot of reptile breeders professionally will declare a loss, because they are holding back a lot of animals to increase their net worth / collection / future years incomes. If you hold back 50% off your offspring, you obviously could have sold more and made more money, but now your company has that much more assets / breeding stock. You avoid taxes whilst building up your potential for the future. Certainly the very highest end things that could make the most money, most breeders will hold back at first for their own collection.

In the states, in a lot of the states, there is a sales tax added to the price of items after you purchase it... like a wholesaler adds VAT afterwards. Here, shops have to include VAT, work out their own percentage of VAT to pay that back. VAT here is based on total turnover. You can make zero profit, but have to pay VAT on the sale of 100k goods, even if your expenses are 100k. It wouldn't be fair to most small businesses/breeders to take that hit at the end of the tax year. But income tax, you pay based on your profit / personal income, so really, I think everyone should be declaring that - if they make a profit.

[purejurrasic]

I cant speak for our American cousins, but here in the UK the situation is this:

Any person who earns money or goods in kind, should declare it to inland revenue. They will then asses if any tax is due for payment or indeed refund.

Things are slightly different for limited companies as they involve corperation tax ect, so my reply does not apply to them.

As an individual, if I were to receive and income from selling a reptile, I would need to declare this to IR.

There are two ways to do this. If the income is less than £2500 in any one tax year, I DO NOT need to register as a business (self employed or otherwise). I would simply need to informally advise my local tax office in writing that I have had this income. I can also advise them of the costs involved in getting that income, and they would then asses if tax is payable.

I am not about to advise on record keeping, but it goes with out saying that they may want to confirm the info I supply so I should be keeping records.

If my income is over £2500 then I would need to register as self employed. I would then need to complete tax returns each year and be assesed for tax liablity.

Now, my income may well be over £2500, but that may not be my profit, so I may infact make a loss, as in the OP example. In this situation the loss can be offset against next years profit (if there is one) thus reducing the tax payable overall.

In my case, If I made a loss this year, I can, as I also have a full time job on PAYE, offset the loss I make in my 'hobby' against the tax payable from my job.

Now, it gets complicated because I cant say to IR I spent £100 on a viv, as that viv can be expected to last beyond the year, so only a proportion of that £100 can be classed as expenses this year !

Regarding VAT, yes the current threashold is indeed £67000.

So, in conclusion, you only need to register as self employed if your income from selling is over £2500, and for VAT if turnover is over £67000.

BUT, everyone who sells anything and gets an income, even non reptile related things such as car boot sales, should be advising IR of that income.

In my case, my average profit (taxable income) is still not over that £2500 even after 3 years, and my informal declarations have all gone unanswered by IR !

So, I suggest a more apt question is how many private breeders (assuming shops etc are fully aware and compliant) do infact declare income?? (and keep all the records to support it)

I can recomend Quiken for keeping this info, I can see at a glance different catogories of expense and income, and it can also produce P&L reports and balance sheets

And before anyone jumps on me, yes, I have been self employed, yes I have owned a limited company, Yes I have been a director and company secretary, yes I have administered PAYE for my employees, yes I have been responsible for VAT registration, and yes I have confirmed all the above with IR today , so I am not just guessing at things.

[Athravan]

Good information there

The only other thing I can think of also, is that I believe if you receive state benefits, you may be obligated to declare any income, if it's a means tested benefit, which then may affect your benefit sum. I think they are now heavily marketing the fact that to receive any outside income but not declare it is classed as benefit fraud.

I have a friend who used to sell used goods on ebay, would go to antiques shops and buy, and then resell on ebay, and she was reported, and had to stop doing so or she would lose some of her disability benefits... so if you are on benefits, do check how this affects you receiving income elsewhere and the amounts you are allowed to receive.

[PSGeckos]

Originally Posted by purejurrasic

I cant speak for our American cousins, but here in the UK the situation is this:

Any person who earns money or goods in kind, should declare it to inland revenue. They will then asses if any tax is due for payment or indeed refund.

Things are slightly different for limited companies as they involve corperation tax ect, so my reply does not apply to them.

As an individual, if I were to receive and income from selling a reptile, I would need to declare this to IR.

There are two ways to do this. If the income is less than £2500 in any one tax year, I DO NOT need to register as a business (self employed or otherwise). I would simply need to informally advise my local tax office in writing that I have had this income. I can also advise them of the costs involved in getting that income, and they would then asses if tax is payable.

I am not about to advise on record keeping, but it goes with out saying that they may want to confirm the info I supply so I should be keeping records.

If my income is over £2500 then I would need to register as self employed. I would then need to complete tax returns each year and be assesed for tax liablity.

Now, my income may well be over £2500, but that may not be my profit, so I may infact make a loss, as in the OP example. In this situation the loss can be offset against next years profit (if there is one) thus reducing the tax payable overall.

In my case, If I made a loss this year, I can, as I also have a full time job on PAYE, offset the loss I make in my 'hobby' against the tax payable from my job.

Now, it gets complicated because I cant say to IR I spent £100 on a viv, as that viv can be expected to last beyond the year, so only a proportion of that £100 can be classed as expenses this year !

Regarding VAT, yes the current threashold is indeed £67000.

So, in conclusion, you only need to register as self employed if your income from selling is over £2500, and for VAT if turnover is over £67000.

BUT, everyone who sells anything and gets an income, even non reptile related things such as car boot sales, should be advising IR of that income.

In my case, my average profit (taxable income) is still not over that £2500 even after 3 years, and my informal declarations have all gone unanswered by IR !

So, I suggest a more apt question is how many private breeders (assuming shops etc are fully aware and compliant) do infact declare income?? (and keep all the records to support it)

I can recomend Quiken for keeping this info, I can see at a glance different catogories of expense and income, and it can also produce P&L reports and balance sheets

And before anyone jumps on me, yes, I have been self employed, yes I have owned a limited company, Yes I have been a director and company secretary, yes I have administered PAYE for my employees, yes I have been responsible for VAT registration, and yes I have confirmed all the above with IR today , so I am not just guessing at things.

Woweee thanks for the great post Tony - very, very informative

Originally Posted by Athravan

Good information there

The only other thing I can think of also, is that I believe if you receive state benefits, you may be obligated to declare any income, if it's a means tested benefit, which then may affect your benefit sum. I think they are now heavily marketing the fact that to receive any outside income but not declare it is classed as benefit fraud.

I have a friend who used to sell used goods on ebay, would go to antiques shops and buy, and then resell on ebay, and she was reported, and had to stop doing so or she would lose some of her disability benefits... so if you are on benefits, do check how this affects you receiving income elsewhere and the amounts you are allowed to receive.

Once again, thank you Athravan for this very informative post, and yes, you are correct, depending on which benefit they were claiming, as some are not means tested, but on the whole, you will have to declare to DWP any form of extra income received, failure to do so would be classed as fraud.

[spider_mad]

I listen to a radio show online (Dublin FM104) talk show in the evenings and forget the topic and what were talking about but few weeks ago I heard that if, say a 16 year old is earning a few bob from babysitting they actually have to declare it. Next we'll have to declare our farts with a methane gas tax lol.