Bakery and Catering business.

[Marketing King]

We are about to start our Bakery and catering Business within the Notts/Derby border.Advice would be much appreciated off members of the site.Various questions are popping up all the time.Our aim is to supply small cafes,and the such like quality,well priced home made produce.Our over heads are really low so our prices will create interest.I am the lucky person who will go shop to shop,cafe to cafe to get the orders.Where we live there is definately a market to supply such places as in small shops,cafes.petrol stations etc.Any advice would be appreciated..
..Do we go volunteer vat reg?
..any restrictions in installing a commercial kitchen in a ind unit
...aNY RESTRICTIONS ON USING THE WORD HOME MADE.
we have done our market research and we have seen a gap in the market.We will also do outside catering and a sandwich delivery

 

[billie1]

I think it's a great idea. I will be doing something similar in the London area, supplying cafes and coffee shops with gluten free, wheat free, dairy free and nut free products. I'm currently working on proofing my recipes. I will be starting from home and as the business grows I will move into commercial premises.

You will need to do some research on installing a commercial kitchen. The local council in charge of the area should be able to give you some advice.

Good luck?

 

[Deleted member 140422]

Hi
I've been in similar line of business for 6 years now.

Commercial kitchen in Industrial unit should not be a problem planning wise, but I would consult your local Enviromental Health Dept. at the start.They will givel you advice, better and a lot cheaper than they coming along later and telling you what needs correcting. They will need to register and inspect the premises.

VAT yes. You can claim vat back on all the equipment, and there will be no vat on most of your sales. You shoud get a nice refund from them each quarter.

"Home Made" from an industrial unit is fraud. Most use hand made instead (assumong you are a small bakery and not a fully mechanised giant). Or "Tastes like homemade"

I would also advise consulting local Trading Standards about labelling requirements.

In general I've found the relevant local gov Departments a great help if you consult them at the start.

Also you will probably be entitled to a grant for 50% of equipment costs.

Hope this helps

Good luck with your business

 

[billie1]

Hi
I've been in similar line of business for 6 years now.

Commercial kitchen in Industrial unit should not be a problem planning wise, but I would consult your local Enviromental Health Dept. at the start.They will givel you advice, better and a lot cheaper than they coming along later and telling you what needs correcting. They will need to register and inspect the premises.

VAT yes. You can claim vat back on all the equipment, and there will be no vat on most of your sales. You shoud get a nice refund from them each quarter.

"Home Made" from an industrial unit is fraud. Most use hand made instead (assumong you are a small bakery and not a fully mechanised giant). Or "Tastes like homemade"

I would also advise consulting local Trading Standards about labelling requirements.

In general I've found the relevant local gov Departments a great help if you consult them at the start.

Also you will probably be entitled to a grant for 50% of equipment costs.

Hope this helps

Good luck with your business

Do you have any advice for someone starting out at home? One of my challenges is working out pricing as I'm unsure how many of each product the cafes will be willing to take. I'm worried about pricing too low but pricing too high may result in products being sold at too high a price to consumers, but I also want to make a profit.

 

[Deleted member 140422]

Do you have any advice for someone starting out at home? One of my challenges is working out pricing as I'm unsure how many of each product the cafes will be willing to take. I'm worried about pricing too low but pricing too high may result in products being sold at too high a price to consumers, but I also want to make a profit.

If your working from home be careful about "nut free", as there will probably won't be a nut free enviroment.

I've no idea about pricing in London, but gluten free and wheat free are popular premium products. Cakes generally are high profit margin products. I would suggest that you check out goods at your local farmers market and start about 10-15% lower.

It might be worth doing a few farmers markets just to get a feel for what's popular/pricing levels etc. Also you'll find lots of people asking about you supplying them.(though a lot are a waste of time)

I've noticed lately that a lot more customers are asking for proof of the food producing premises being registered with the local council. Ifv you have pets keep them well away from the kitchen. A strict no no

Products will need a sell by date, and name and address and description. I.E. you can't just call it "Fruity and Nutty", it must also say cake or whatever.

Any other queries I'll help if I can or you can PM me

Good luck

 

[JonathanSEO]

VAT yes. You can claim vat back on all the equipment, and there will be no vat on most of your sales. You shoud get a nice refund from them each quarter.

I would like an accountants view on that as it doesn't make sense to me...

Seems pointless to register for VAT when it's a startup and you won't be making large amounts of purchases. Plus you will surely be selling to plenty businesses that won't be VAT registered either. Thus making yourself 20% more expensive if you do register?

 

[David Griffiths]

I would like an accountants view on that as it doesn't make sense to me...

Seems pointless to register for VAT when it's a startup and you won't be making large amounts of purchases. Plus you will surely be selling to plenty businesses that won't be VAT registered either. Thus making yourself 20% more expensive if you do register?

But most bakery products are zero rated, so registration would make the OP 0% more expensive, not 20%. Registration enables the recovery of input tax without an increase in selling prices.

The catering side can be tricky from a VAT perspective so some advice might be useful there. But if customers are VAT registered businesses, that's not an issue.

 

[Deleted member 140422]

I contacted Vat office and discussed it with them.

 

[businessfunding]

But most bakery products are zero rated, so registration would make the OP 0% more expensive, not 20%. Registration enables the recovery of input tax without an increase in selling prices.

The catering side can be tricky from a VAT perspective so some advice might be useful there. But if customers are VAT registered businesses, that's not an issue.

Is there not an offset on zero rate goods? (partial exemption or whatever)?

 

[businessfunding]

Basing on a problem a bakery client of mine had - I understand 3-phase power can be a problem.

 

[billie1]

I find the VAT situation for baked goods very confusing. It says cakes and most biscuits are zero rated VAT however if they are supplied within the course of catering they are standard rated. How do you determine if an item falls within the course of catering?

Catering is the supply of prepared food and drink. It is characterised by a supply involving a significant element of service.

According to HMRC if you answer yes to the following they will come under standard rated VAT. 1) Is it within the ordinary meaning of catering? 2) Is it for on-premises consumption? 3) Is it hot take-away food?

Based on this information would a business who is supplying cakes and cookies to coffee shops and restaurants fall under zero rated VAT or standard rated VAT?

 

[billie1]

I should have added the following info, also taken from HMRC website.

2.1 What is the ordinary meaning of catering?
Catering in its ordinary meaning includes the supply of prepared food and drink. It is characterised by a supply involving a significant element of service. Obvious examples of supplies in the course of catering include:

• Supplies made in restaurants, cafes, canteens and similar establishments (except supplies of cold take-away food).
• Third party supplies of catering for events and functions, such as wedding receptions, parties or conferences.
• A supply of cooking and/or preparation of food provided to a customer at the customer’s home, for example for a dinner party.
• Delivery of cooked ready-to-eat food or meals (with or without crockery or cutlery).

top ^
2.2 Catering contracts
Any supply of food and/or drink as part of a contract for catering is standard-rated.
However, a contract that merely entitles a food retailer to occupy a set of premises from which they make their supplies does not automatically determine that a supply is one of catering. In these instances it is important to consider all of the activities being carried out.

 

[10032012]

You wont be able to use "homemade".

HMRC are not clear on this they seem to list every other scenario.

If you take sandwiches, or other items of food and drink, to buildings in order to sell them, but have no contract or agreement to do so, this is not a supply in the course of catering and you can zero-rate any item that is eligible (see Notice 701/14 Food for further details).

However, if you are supplying the food under a contract, for example to cater for an event, you are making a supply in the course of catering and all your supplies will be standard-rated.

I would assume as you would be supplying such goods under a contract (even if verbal) to another business for resale and that you cannot guarantee the items would be purchased by the end customer for consumption off the premises (the latter being less applicable) it would be standard-rated.

Obviously, either contact HMRC or an accountant with expertise in this area (supplies are usually zero rated) - you can always trade without voluntary VAT registration as you can claim back the VAT when you need to register.

It will take quite some products sold in the first year to exceed the VAT threshold as a wholesale supplier (not a retailer).

 

[Chris Ashdown]

I am conserned in your openeing statement we can produce cheaper then their present suppliers, or words to that effect

You have mega costs on catering equipment like ovens and other stainless steel equipment and installation into a unit

You need workers who are willing to start at some ungodly hour to have your products ready for when the outlets open up

I would suggest most cafe would buy their bakery products from either Supermarkets or Cash and Carry at quite large discounts

Untill you work out all your start up costs including say seposit on unit and equipment and fittings you will have no idea if you can compete

 

[The Byre]

One big gap in the market is real bread.

I have lived most of my life outside the UK and coming back to the UK, the standard of the bread is a real shocker.

The flour it is made from has been BLEACHED! The white bread almost shines in the dark and can be squashed into a lump the size of a horse pill!

The brown bread is reddish-brown, because it has been COLOURED brown!

The so-called fresh bread in the supermarkets is just part-baked and frozen in a factory.

If you find a place that sells real bread, it is almost always sold out on the first day of delivery, because the foreign workers from Poland and elsewhere are desperate for real bread.

If you can make real bread, it will be ripped out of your hands, especially by the Polish delis!

A real German/Polish farmer's loaf is one part rye and four-to-five parts wheat. But it MUST be cold ground REAL flour, NEVER the boiled and dried powdered glue that passes for flour in the UK. It is dead simple to make!

(I could now get to grips with the filth that passes for beer in the UK, but I'll do that some other mad day!)

 

[billie1]

I spoke to HMRC yesterday and the adviser said they couldn't give me a difinitive answer. He advised I read the information carefully and decide what VAT band I would come under.

I would like to register for VAT so I can claim back the VAT from goods I purchase for the business. It would pose a problem if I came under the standard VAT rate as it would make my goods more expensive. Whereas if I come under the zero rated band, I would charge zero VAT.

 

[10032012]

yeah HMRC don't give advice when they should be the absolute resource of yes or no to a query.

 

[Lentinus]

I went through a similar VAT issue - thankfully only one product. HMRC said the same to me - ie cant give you a definitive answer.
Basically I studied all of the HMRC information and made a decision based on what I read, but documented the different parts of the different notices so that should my decision ever be challenged then I can point to the reasoning.