Advice for starting a Vending Business

[Jack1337]

I'm new to all things Business.
I've been doing eBay mainly but want to go into vending. I'm 19 at the moment.
Someone local is selling a vending machine cheap, so theres no real "risk" as not putting huge amounts on the line.

Just wondering what things I would need to do to make it legal etc.
Do I need to be registered as anything? A company? Sole Trader? If so , where/how, as havent done this before.

Do I need any food Hygiene certificates etc?

Do I need to pay any VAT on anything, or not as its below £85k a year?
Any other expenses I need to worry about?

I assume the machine will need to be tested by an electrician if it hasn't already.

Also, do I need any sort of insurance on it? for the location etc?

And any other advice would be welcome, like finding sites etc
Worst case scenario, I can just sell the machine on.
Ideally I can collect from the seller and put straight on location, as I doubt it would fit in my house.
that way, I will only need to pay van rental once.
Thanks for any advice.

 

[Mr D]

You can set up a company or set up as a sole trader. Different costs, different taxes, different benefits.
For most low turnover businesses the easiest and cheapest probably is a good idea - sole trader.

OK, you buy the vending machine. You going to fill it? You pay someone to rent space and power for it?
You pay VAT on anything that is subject to VAT, just as you have been doing since you spent your first money. You don't need to register to collect VAT yet.

 

[Jack1337]

You can set up a company or set up as a sole trader. Different costs, different taxes, different benefits.
For most low turnover businesses the easiest and cheapest probably is a good idea - sole trader.

OK, you buy the vending machine. You going to fill it? You pay someone to rent space and power for it?
You pay VAT on anything that is subject to VAT, just as you have been doing since you spent your first money. You don't need to register to collect VAT yet.

I'm going to be doing all the work

I plan to put it in a local business (Yet to find)
Like a gym or something and probably end up giving them 10% of all earnings from it.

I was looking at the VAT threshold (85k)
and the Income tax threshold (£12.5 before you have to pay anything)

I dont expect to hit these targets soon, and plan to do this as a sort of "side business" and a little extra income each month (I'm a full time student).

An example of what I would expect is;
Costs
£100 to fill the machine with stock (bought from wholesalers)
expected income would be approximately £100 a week from what I have seen other people getting. (restocking fully around every month - 1.5 months [off course some things will be restocked sooner, this is just a rough guide])

Does that mean, as my expected income is less than both of these thresholds, that no tax has to be paid?

How would you know how much is too be paid, both now and in the event I do hit the threshold?

And can I deduct tax from the purchase of stock like I see some people do (on youtube etc)

Is it worth getting some sort of accountancy software like quickbooks from day 1?

Also, due to such low income and spending, does it even need to be registered at all?
Honestly, the reason I'm doing my research, is because I expect locations to have me doing everything by the book, and be registered in all the right places. What would be nice is if i could just go out and do it without needing to worry about all the extras and tax and legal stuff etc.

Also, is liability insurance legally required and if so, would that be my responsibility or the location of the vending machine.

 

[Mr D]

A gym may be wanting more than 10%. That's if they have room - likely that popular places already have some vending machines and you would need to stock with something not currently sold.

Income tax threshold may take you a while to hit. If a sole trader then its your profits that is your income. May be a while to get much profit.

When you register with HMRC they send you a self assessment form to complete every year. Can do it online much easier but need to register to do that.
Then you give details of your sales and your expenses - for very small businesses as I recall its 3 lines, one of which is the sum of the other two. Income minus expenses = profit.

Some wholesalers want you to provide them with proof of trading by supplying other suppliers invoices. Heck, sometimes its cheaper at the supermarket than the cash & carry.

You don't deduct tax from anything, you pay tax as required. Later when you are VAT registered you will offset VAT paid against VAT collected. Way down the line for you yet.

You can get some accountancy software. Can get some free ones too.
Or can do in excel. I used to do the annual accounts with pencil and paper, a couple of hours a year including tax returns online.

Below £1,000 you don't need to register. By the sound of that you will quickly go through that.
https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

Insurance - good question.

 

[Jack1337]

A gym may be wanting more than 10%. That's if they have room - likely that popular places already have some vending machines and you would need to stock with something not currently sold.

Income tax threshold may take you a while to hit. If a sole trader then its your profits that is your income. May be a while to get much profit.

When you register with HMRC they send you a self assessment form to complete every year. Can do it online much easier but need to register to do that.
Then you give details of your sales and your expenses - for very small businesses as I recall its 3 lines, one of which is the sum of the other two. Income minus expenses = profit.

Some wholesalers want you to provide them with proof of trading by supplying other suppliers invoices. Heck, sometimes its cheaper at the supermarket than the cash & carry.

You don't deduct tax from anything, you pay tax as required. Later when you are VAT registered you will offset VAT paid against VAT collected. Way down the line for you yet.

You can get some accountancy software. Can get some free ones too.
Or can do in excel. I used to do the annual accounts with pencil and paper, a couple of hours a year including tax returns online.

Below £1,000 you don't need to register. By the sound of that you will quickly go through that.

Insurance - good question.

To summarise then;
I can essentially buy the machine, put it on location, buy stock and start trading without doing anything.
after a couple of weeks, once I hit 1k, I register as a sole trader and register for the online tax form?? (will do this before then, probably once set up).
Once I register then, I just keep a record of everything I spend:
Spreadsheet of how much I spend on stock and maintenance

and how much I get:
another page on the spreadsheet for each time I collect cash from the machine (E.g weekly)

and then at the end of the year I just fill in a form online by entering the Incomes and out goings.

Will there be any tax if below £12,500???

and you only file the tax every year?

I looked at public liability and it only looks like it would be £10 a month, which if in doubt, I'm willing to spend.

Sourcing the product, I will just keep my eye out for deals etc, got a few ideas up my sleeve.
Same with location, I will try and confirm one before actually buying one, so I don't have to keep it in the house.

 

[Ray272]

Sounds like a headache.

When I was a student I sold dried magic mushrooms due to a loophole in the law which enabled a mushroom franchise to open in 9 university cities (Amsterdam or London was the name) the one near us shut at 5 but no one decided to do mushrooms until after 11pm. I would buy all the stock from them and sell it at night with delivery, for 5 times it's cost in the shop.

Also just relisting stuff on eBay can make decent cash. I used to find a cheap item in a sale or whatever and sell it at a higher price with different key words.

 

[Jack1337]

Sounds like a headache.

When I was a student I sold dried magic mushrooms due to a loophole in the law which enabled a mushroom franchise to open in 9 university cities (Amsterdam or London was the name) the one near us shut at 5 but no one decided to do mushrooms until after 11pm. I would buy all the stock from them and sell it at night with delivery, for 5 times it's cost in the shop.

Also just relisting stuff on eBay can make decent cash. I used to find a cheap item in a sale or whatever and sell it at a higher price with different key words.

I already do the ebay stuff..... I mean.... I sell "My own, old stuff".... I'm not registered for that, but I actually make less than £1k doing it, so I don't need to be right? Thats a whole other situation which isn't related to this anyway.

What does the mushrooms have to do with this? I'm just a bit confused on what this advice has to do with vending? I mean, its a cheap machine, margines are high, and I think I have a location lined up (sort of...), It was just the legal stuff I was trying to sort out, as I want to do it by the book.

 

[ecommerce84]

In my area there are a few vending companies that seem to crop up all over the county so you may have your work cut out finding a location.

One way in would be to offer a higher percentage to the gym etc than they are already getting but that would eat into your margin.

My other thought would be to look at insurance that covers you should the machine fail and cause loss to the business it’s in. This could be something like the machine tripping the power overnight and them losing stock in freezers or the machine catching fire and burning the place to the ground.

If you have a location lined up and are confident, I would be inclined to go for it. Your young enough that if it fails it won’t make a bit of difference to the rest of your life and if it works you make a bit of money. Either way you learn something about business on the way

 

[Mr D]

I already do the ebay stuff..... I mean.... I sell "My own, old stuff".... I'm not registered for that, but I actually make less than £1k doing it, so I don't need to be right? Thats a whole other situation which isn't related to this anyway.

What does the mushrooms have to do with this? I'm just a bit confused on what this advice has to do with vending? I mean, its a cheap machine, margines are high, and I think I have a location lined up (sort of...), It was just the legal stuff I was trying to sort out, as I want to do it by the book.

LOL the things we get up to as students to make money.

I knew someone at uni selling condoms he'd got for free from local sexual health clinic, made quite a bit of money over 3 years.
People are inventive.

 

[Mr D]

To summarise then;
I can essentially buy the machine, put it on location, buy stock and start trading without doing anything.
after a couple of weeks, once I hit 1k, I register as a sole trader and register for the online tax form?? (will do this before then, probably once set up).
Once I register then, I just keep a record of everything I spend:
Spreadsheet of how much I spend on stock and maintenance

and how much I get:
another page on the spreadsheet for each time I collect cash from the machine (E.g weekly)

and then at the end of the year I just fill in a form online by entering the Incomes and out goings.

Will there be any tax if below £12,500???

and you only file the tax every year?

I looked at public liability and it only looks like it would be £10 a month, which if in doubt, I'm willing to spend.

Sourcing the product, I will just keep my eye out for deals etc, got a few ideas up my sleeve.
Same with location, I will try and confirm one before actually buying one, so I don't have to keep it in the house.

Yes, if sole trader or limited company you only do accounts once a year. Start this financial year (before 6th April) and you have until January to submit self assessment details. January 2021 that is - the January after the end of the tax year. Presuming of course you are using tax years (many do).

 

[ecommerce84]

With regards to registering as self employed, you have until the 5th October in your second tax year to do so, so if you started tomorrow you don’t actually have to register until 5th October 2020, although you’ll need to do your book keeping from day 1.

Bare in mind that although your eBay sales are very much a different arm of your business, they will count towards your registration thresholds and you will have to declare them once you register even if they remain under £1000.

 

[Ray272]

When I was a student I used to make about 7k a year on eBay and that was ok. As I was a full time student and under the threshold maybe. I never thought about it at all to be honest and no one ever asked or came looking.

 

[Mr D]

When I was a student I used to make about 7k a year on eBay and that was ok. As I was a full time student and under the threshold maybe. I never thought about it at all to be honest and no one ever asked or came looking.

These days HMRC can request information from the selling sites so can be aware of who is trading.

 

[Scalloway]

Once I register then, I just keep a record of everything I spend:

You need to start keeping records from the moment you start to ensure you get the best deal for tax.

and the Income tax threshold (£12.5 before you have to pay anything)

I dont expect to hit these targets soon, and plan to do this as a sort of "side business" and a little extra income each month (I'm a full time student).

What other income do you have?

 

[Mark T Jones]

When to register appears to be somewhat fluid. At a recent HMRC seminar their initial line line was that you must register as soon as you decide to run a business; then commuted to your first purchase or sale (the earlier of). Most accountants go with 'prior to the tax year-end'.

The plan is to roll out MTD to all small businesses - which would mean quarterly filing - though the balls-up with the first phase suggest that this will be several years off.

Areas you need to research would include:

- Siting - you need somewhere secure, with decent (relevant) footfall, that isn't already under contract.

- Costs - I'm assuming your 10% is plucked out of the air, you need to know what is actually currently paid whether by profit share or rent (there might also be sweeteners to premise staff).

- Repairs / maintenance - in particular emergency repairs.

- Theft / damage.

- Contracts - you need a good one!