Ignorance is not bliss!

It has come to my attention that not everyone knows where they stand regarding the legalities of being a crafter who chooses to transfer their hobby into a business. I'm not an expert on the legal world by any stretch of the imagination, but I thought I do some research on it.

It is hard to stay within the law if you don't know it so I advise you check out all the legal information for yourself too. One thing for sure stating "I didn't know." will not cut it in todays world. There is nothing more satisfying than producing your own items in your home and selling them to customers so don't let the following information deter you at all. If you have a dream go for it!

This is my interpretation of the main things you need to consider when selling your hand crafted items at a craft fair, within a shop or online whether it is through facebook, your website or a selling platform like ebay.

You are classed as a home business if you:

  • Work from home or a client’s property whether it is providing a service such as an accountant or selling a product at a craft fair or even on online selling platforms such as ebay.
  • You buy in at a trade price to sell at a profit or make items such as jewellery, cards, etc.
  • You operate your business on your own or have up to six employees.

From this point onwards I’m going to concentrate on crafters selling homemade products.

Trading Standards

Never be afraid of trading standards, they are here to keep the general public safe and are more than willing to help you if you have questions. They have been fantastic over the phone when I’ve asked for advice on some of my products.

One of the key areas that trading standards are concerned with for crafters are toys! Afterall children require the highest level of protection and their safety is paramount. Toys are products which are clearly design for people under the age of 14 to play with. Such items must be tested and CE marked

If you sell collectors toys it is essential that you do not mix them with other toys that are meant as play items.

There are items that are exempt from the Toy (Safety) Regulations 1995 and I have cherry picked the following: Christmas decorations, folk dolls and decorative dolls (and other similar articles for adult collectors), puzzles with over 500 pieces and fashion jewellery for children over the age of 3 years old.

There is a hefty fine for breaking this law so please check with trading standards if you are unsure of where you stand. It would be wise to check out the Cosmetic Product Safety Regulations 2008 (as amended) if you make bath products and all the food hygiene regulations for all hand prepared foods including sweets.

Before selling your hand made creations you should ensure you are correctly insured. Most craft fairs will require this from their crafters anyways but it is good practice to have the following cover as you won't be covered under their policies.

  • Public Liability – This covers you, if someone claims they have suffered injury from your business practice. This includes your stall table collapsing or someone tripping on a box in front of your stall, etc. It should cover loss of earnings and legal costs for yourself as well as the claimant too.
  • Product Liability – This covers you, if someone claims they have suffered injury or damage to property due to the product you have sold to them. For example , they buy a necklace and have a severe allergic reaction to it as an element of it is coated with a non safe chemical or a person buys a red necklace which stained their white top pink when it rained.
  • Business stock – This should cover you if your vehicle is stolen with your stock inside it or in the event of a fire breaking because the sun has magnified heat through glass and burnt down your stall at an outdoor fair – I have actually seen this happen, luckily it just smouldered though.
  • Loss of income – This could be due to a fire, flood, etc of the venue you are attending.
  • Theft of money – This should cover you if your earnings or float are stolen at home, in transit or at a venue your attending.

Some companies might also cover you for a laptop and a mobile phone if used for your business as well as other portable equipment.

Her Majesty’s Revenue and Customs

It is important if you are selling items on a regular basis to let HMRC know as soon as you can because you will be classed as self-employed. I believe you should do this within the first three months of trading. This is to give you a chance to try it and if you feel it's not for you there are no repercusions. Failure to notify HMRC may result in you having to pay a penalty for not filling in a self-assessment tax form.

It’s easy to register online but think this through carefully as it may effect benefit entitlement if you claim for any. For example you won’t be able to claim job seekers allowance as you will be self-employed but you may be entitled to tax credits.

I would advise if you claim any type of benefits to check out how claiming self-employment will affect this. It is clear that you need to state all income you receive if you are actively trading, as the Government is cracking down on home businesses including those trading online, it won't be long before they start attending fairs and seeking out shops such as mine who sell people's goods.

If you are employed and you are raising money to supplement your income there is no requirement to inform your employer providing it doesn’t interfere with your position within that company but you will still be required to fill in a self-assessment tax form. It would be wise to note that if you claim tax credits this may have an impact on your entitlement.

VAT

For small crafters this is rarely an issue. You only have to register for VAT if your turnover is more than £77,000 in a twelve month period.

Here are some links to the clearest information I have found on all of these issues, during my research the past couple of days. There is far more detail on these sites, so please look at them.

Feel free to comment on this or any other blog posts using the facebook comment box below.

http://www.walkaboutcrafts.com/crafttopics/regulations/toy.htm
http://www.directlineforbusiness.co.uk/businessfromhome/welcome.htm
http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm
http://www.moneywise.co.uk/work-wages/make-more-money/make-money-your-hobby
http://www.hmrc.gov.uk/vat/forms-rates/rates/rates-thresholds.htm