Son's Cake Business

injectionday

Hi. My son is 15 and wants to start selling cakes on Etsy. He's expecting this to only be  small scale with a handful of orders a month so not much money.

I've been looking at the requirements and it seems we'd need to register with the Council, take out public liability insurance and register with HMRC which seems a lot for maybe £50 profit a month. Is that what everyone else does?

It also seems that he can't register with Etsy until he's 18 so it would need to be in my name, but I'm a higher rate tax payer so would we then end up paying 40% tax on anything he makes? 

DullGreyGuy

Requirements for a "food business" varies by council, some have an occasional business exclusion (eg someone running a supper club once a month) whereas others go the full way no matter how small you are. If your council is at the later extreme, as unfortunately ours is, that means either you need a separate kitchen for the business or you need to run your domestic kitchen like a commercial one in terms of labelling anything open, separate hand washing sink etc (at least that was the guidance from our council). 

There is no legal requirement for Public or Product Liability insurance but it's both sensible to have it and markets etc may make it a contractual obligation. Product is going to be particularly sensible given he is making his product but thankfully for small business the two are bundled together typically. 

As to tax, assuming you are not already self employed then you get a £1,000 trading allowance before having to register (thats revenue not profit). Even if you did register you are buying the cakes from him so wouldn't be unreasonable for you to pay him for that, ideally as him also being self employed, thus you materialise little to no profit and the money is his and taxed appropriately there. 

 Remember to also check the impacts on your Home insurance, Mortgage/rental agreement etc, many won't allow a business activity outside of clerical. 

What do a lot of people do? They don't do things by the book either out of ignorance or thinking they are too small for anyone to bother about. 

Bue21

Registration as a food business is very simple and can usually be done online - take a look at the website for your local district council (district, borough or unitary council not town/parish or county). The guidance issued by the Food Standards Agency suggests every business needs to register but sets out guidance as to what would constitute a business ( generally if it operates less than once a month it wouldn’t constitute a business). I would be surprised if any authority didn’t require a monthly lunch club to register as that is one of the examples given (and is high risk considering the age of attendees).
Cake makers often use their domestic kitchen with no issues - just need to exclude pets and clean down and disinfect all surfaces before you start work. You also need a dedicated wash hand basin (if you have a small half sink next to your main sink that would be ideal). Otherwise keep the sink free and use a bowl to store dirty equipment etc. Some basic level 2 hygiene training may also be required (can be done fairly cheaply online). It is very likely the council webpages will have a great deal of relevant information on starting a new food business from home as it is very common.
I have no idea with regard to tax implications or insurance requirements.

gwynlas

I do not have any experience of trading on etsy but would it not be better to have direct contact with customers? There are a number of people selling home baked goods from  stalls at a local market, mind you that is at a popular town in Hampshire. I would think that there might also be openings at independent coffee shops. I am sure that he is business minded and will cost his time, ingredients and use of your fuel accurately to be profitable.

Robin9

injectionday said:

Hi. My son is 15 and wants to start selling cakes on Etsy. He's expecting this to only be  small scale with a handful of orders a month so not much money.

I've been looking at the requirements and it seems we'd need to register with the Council, take out public liability insurance and register with HMRC which seems a lot for maybe £50 profit a month. Is that what everyone else does?

It also seems that he can't register with Etsy until he's 18 so it would need to be in my name, but I'm a higher rate tax payer so would we then end up paying 40% tax on anything he makes? 

injectionday said:

Hi. My son is 15 and wants to start selling cakes on Etsy. He's expecting this to only be  small scale with a handful of orders a month so not much money.

I've been looking at the requirements and it seems we'd need to register with the Council, take out public liability insurance and register with HMRC which seems a lot for maybe £50 profit a month. Is that what everyone else does?

It also seems that he can't register with Etsy until he's 18 so it would need to be in my name, but I'm a higher rate tax payer so would we then end up paying 40% tax on anything he makes? 

Your son shouldn't undervalue himself -   we love a coffee cake from my greengrocer for which I pay £6 or £7 depending on size (usually the larger one !). I would expect the greengrocer to have a good mark up and is buying at perhaps £4 or £5.  Can you son make these for £2 or £3 - inc the ingredients and the energy costs - to ensure he is making a good income.

DullGreyGuy

Bue21 said:
The guidance issued by the Food Standards Agency suggests every business needs to register but sets out guidance as to what would constitute a business ( generally if it operates less than once a month it wouldn’t constitute a business). I would be surprised if any authority didn’t require a monthly lunch club to register as that is one of the examples given (and is high risk considering the age of attendees).

Average age at a supper club is 25-45 probably so not sure why you think they'd be high risk based on their age?

At the time we were considering it we had our home in one council and a commercial unit (non-food) in another. Home council said any food production required registration and inspection before commencement. The other said something only operating 1 per month didn't need inspection (cannot remember about registration but want to say no)