Jul
1
2015

Is Your Hobby Really A Craft Business?

When is a Hobby no longer a Hobby but a Craft Business?

On reading a recent article on the Telegraph online via FaceBook about HMRC targeting Etsy, eBay and Gumtree sellers, it got me thinking on when is a hobby no longer a hobby but a craft business – no matter how small?  Instead of me writing a long ‘rant’ on Facebook, I thought I would do a little blog on it instead.

So here it is!  I hope it makes sense, it’s my thoughts and views obviously on what’s involved running a craft business (whether it’s considered by you as a hobby or not).  You might agree or chose not to agree – that is perfectly fine and your choice to make.

I’ve read on some FB groups about traders who are at Craft Fayres and Events. Stall holders are permitted to trade by organisers without making sure products are fit to be sold to the general public i.e. CE Tested for compliance or legal to be sold in UK etc.  Which then makes you wonder if trader then has public liability, product liability etc. etc. etc…

I know it all sounds a bit like the Craft Police – but if you think about it…

There is a lot involved before you actually set up stall at a craft fayre (or sell online).

What’s Involved In A Craft Business?

a. Cost of production

If you are selling your items (like me) and you take into account;

  • materials required to make the item or items,
  • your petrol/diesel or costs of purchasing them,
  • time taken to research or design (especially if its a one off or has something special on it),
  • cost of making it,
  • packaging (lots of people like their items to come gift bagged or boxed or wrapped in tissue.

That’s just the item then made.

b. Before you get a stall at a craft fair

Before stall fees you need public liability – not as cheap as people always think or comprehensive.  Lots of places are asking for really high PL insurance to!?  You do need insurance to sell in any public venue or arena.  At one stage I had PL for my Training business and 1 for crafting business – as they do not overlap.

Then you might also need product liability.  This is to ensure that if your product is found in any way faulty or cause injury you’re covered, for instance – toys, food and lots of items. (I can not remember them all but you can find that out easy enough to be honest).

c. Compliance costs

chunky hand knitted teddy available in my Etsy Shop https://www.etsy.com/uk/shop/PitterPatterTinyFeet

Chunky hand knitted teddy CE tested available in my Etsy Shop

If you are selling items that fall into a category that need CE testing you need to purchase the Compliancy package for CE testing and go down that line.

There is some financial outlay for the pack and then you can do some home testing to make sure compliant for CE mark.  In some cases you may need further certificates that may well cost something from manufacturers or you can join FB groups that can help in that matter and point you in right direction.

Even then you have to go back a bit – to actually deciding on what you are selling – I knit so obviously mine is knitting and crocheting related.  So I will and can only speak for myself on what I have HAD to do.

You then keep a folder of all that you have done as evidence so that if ever Trading Standards needs to see this you can show your compliance and god forbid that anything you have ever made causes harm to any one that you have evidence for that person in the curly wig – called a court and negligence claim – Law of Tort – sadly we are in a compensation claim savvy society and ignorance is not bliss or excuse for not complying.

d.  Sourcing Materials

You have researched, knitted up prototype.  You’ve done all the testing you can, put the folder together.  Insurances in place – done.

Now you knit up your items.  You have sourced good quality materials – not cheap stuff – good wool or yarn.

alpaca from alpaca farm in rainhill stoops

I knit with wool from this actual alpaca…

I stay local by purchasing from local shops.

For example a local Alpaca farmer and paid a lot more for the wool.

But it’s local and high quality – so I keep focused on that.

The materials are not cheap, but it’s good helping the local community and local economy.

Accessories are bought from local traders in the market – not from China where it can be so much cheaper.

Again keeping focus on local and support your local trader.

e.  Pricing

You price up your items taking everything into account, pattern costs, materials to make, all the other costs involved, your time, and you have researched to death what price is a good and fair price.

f.  Selling

You go to the local Craft Event – paid your fees, set up stall.  Your stall is made of items to make it look attractive (which you have again made or bought local trying to look professional).  Your cards are on the table, everything is set…

how to sell at craft fairs - how you display your items makes a huge difference

 

…to find that 4 stalls away you there appears to be someone similar re Craft.  Selling items that are so much cheaper than yours, appear to be raising money for a charity (not always linked to the event or organisers).  From what you can ascertain not the greatest in materials being used – and prove popular because they are so much cheaper.  From toys to baby items the full hit.

I’m a craft BUSINESS

Now is it just me being a grumpy ole woman, knitter and crafter – but how bloody unfair is that all.

If you are registered with HMRC, done all the things that are right and above board with running a business and find (I will say it sorry if offends) that a knitting circle or group have been given a stall.  Then get told well they are just doing this as a hobby and money raised gets them more wool to knit more things – WTF moment.

Now the article was about HMRC checking all those selling on ebay, etsy and gumtree etc.  It would be interesting to also see how many at many of the Craft events whether they are from big organisers through to community centre events are actually doing this as well.

So here is the question…

When is a Hobby no longer a Hobby but a Craft Business?

The answer is very short and simple in HMRC’s eyes and really to be fair to the rest of us who play fair too.

As soon as you trade regardless of whether it is in financial terms or in services.

Shall I rant a little more?

Oh ok – here goes.

1. Am I a Hobby Craft Business?

No, I am a Business that has come from my Hobby originally, but is now what I do on a more professional and legal way.  I charge a fair price for my goods and I am set up as any other business would be either with a store or online (as I am now more and more trading).

I am registered with HMRC.  Every penny I earn from all that I do is evidenced and recorded.  If I need to pay Tax I do so. I pay NI contributions and all the other fees that are required of me to be able to trade legally and correctly in the UK.

2. So do I worry that HMRC are now looking to see who is trading on all these online selling sites, or even if they were to start coming around Craft Events and so forth?

Another very simple answer is, No absolutely no worries what so ever.

3. Do I think that HMRC are focusing in the right places re tax and so forth?

Probably not in all honesty, but then I am not putting my finances into off shore accounts or have been able to register as living out of the country for tax purposes!!

What I am doing is the right legal way of running a business.  I’ve turned what was once a hobby into a business – even if part time and small income.

My frustrations are not actually with HMRC or Trading Standards believe it or not.  Of course they should be doing their job in making sure that people are compliant in making sure if taxes should be paid that they are.  That is what they do – I get that.

But sadly many will still decide to not follow what they should do and many of us who do trade legally will still continue to meet them both online and offline.

When is a Hobby no longer a Hobby but a Craft Business?

As soon as you trade.