HMRC & Public Liability Insurance

[hc90]

Hi all,

I have started up a website selling children's clothes, I'm probably making about £50 a week if that at the minute. Do I need to register with HMRC and get public liability insurance now? Or do I wait until it has picked up more?

Thanks in advance.

 

[john1989]

Yes, you should register as self employed.

I'm not sure why an e-commerce business would need public liability. But if you think it is beneficial to have, then obtaining such insurance would be a good idea.

 

[hc90]

I have heard that I am supposed to have public liability insurance to be protected, I am new to all this and am just trying to get my head round it all.

What does HMRC actually do in terms of checks etc? I have kept all reciepts and all invoices of products bought (and sold).

 

[john1989]

Once you've registered, you will then complete a self assessment tax return.

Your next filing deadline will be 31st January 2017.

 

[hc90]

Thank you. Is that all I do, is just fill out self assessment forms? I import from China so want to make sure i'm doing everything by the book.

 

[john1989]

Yes, just self assessment for now. When your taxable turnover for VAT purposes exceeds £82,000 you will have to register for VAT and file quarterly returns.

You might benefit from the help of an accountant.

 

[hc90]

Ok thankyou. I don't think i'll be turning over that much any time soon!

 

[hc90]

Will all my stock be checked by HMRC as I am importing from china (children's clothes)

 

[john1989]

No, but you may have import VAT/duty to pay.

If you are selling children's clothing, it might be beneficial to register for VAT voluntarily.

 

[hc90]

Ok, thank you very much for your help.

I will ring HMRC later to get some more advice on it.

 

[Gecko001]

Whether you take out public liability insurance is up to you. Think of what could go wrong. If you take out insurance, you insurer might be a good source of advice regarding any risks attached to your business.

As a non expert, I would have thought that you have to ensure that the products you sell are safe and comply with the various standards eg. fire resistance of material, no lead paint on buttons or that the buttons are securely attached to the garment so that they cannot be swallowed by a child.etc.

 

[GraemeL]

Insurance is protecting you against the unexpected. You should definitely have public and even more important product liability insurance. A child swallows a button and chokes - a garment catches fire and burns - you must be protected against even just one claim like this or simply the legal fees could bankrupt you.

No-one expects to be the cause of a car accident.

 

[k100danny]

I think what they are referring to is product liability insurance, public is very different. if you had a bricks and mortar shop you would need public, if someone slipped etc this would be covered by your public liability insurance. But most insurers offer complete business packages only and they tie in with each other, public comes with product etc.

The fact you are importing goods from china will affect your insurance premium but this is something you will have to go over with your insurer. I would highly recommend you get this in place asap as should anything happen you will be personally liable, it is only a small risk but i remember certain fabrics from china once being infected with a chemical and they were using this in sofas, many people ended up in hospital and very ill. Things like this are rare but it's better to be safe than sorry.

 

[MyAccountantOnline]

Hi all,

I have started up a website selling children's clothes, I'm probably making about £50 a week if that at the minute. Do I need to register with HMRC and get public liability insurance now? Or do I wait until it has picked up more?

Thanks in advance.

Hi hc90 if you plan to deal with your own accounts and tax returns you may find this link to the HMRC website helpful - https://www.gov.uk/working-for-yourself/what-you-need-to-do

Do make sure you keep some good accurate accounting records so that you can complete your tax return when its due.

 

[paulears]

Instead of HMRC, who don't offer advice on business matters at all, I'd contact trading standards. They actually very helpful IF you can contact them. They now use a centralised system, so a call to your local council office might get you through to somebody.

Work on the principle that if anyone gets cross with you, it will be them - so they will happily advise you because prevention is better than enforcement if there's a problem. From the fire perspective - they were very heavy on clothing that went up in flames - the costume fiasco recently - where kids clothes were not clothes, they were toys and dangerous.

Public liability insurance protects you from claims from the public. If somebody puts on your clothing and the factory didn't wash out the chemicals and somebody comes out in blisters - it's your fault. If a pin is accidentally left in, and they blind themselves on it, it's your fault. If they spill wine on a red dress and the dye comes out and stains an expensive leather suite, it's your fault. Insurance might cost, but only you can decide if it's worth it. In my business, I have insurance that covers me when working in customers premises - did I hang that light properly? Did I really leave that cable across a main through route where somebody fell over it. I sell items by mail order too, and I have decided that what I sell is unlikely to cause problems, because my customers are mainly professionals. However, what if somebody got electrocuted by a poorly made power supply?

Register with HMRC as a self-employed person (even if you have a PAYE job too), and you get a UTR number. Open a bank account for the business to keep it separate and HMRC friendly for end of year purposes. VAT is probably a non-starter as clothing doesn't attract VAT, does it?

It could well be worth a chat with an accountant. Most smaller firms will give you a 30 minute chat for free. Even if you don't have massive turnover, you may find they will guarantee to save you more money than they charge - mine certainly has been useful over the years, even though he really only prepares my end of year accounts and does my self-assessment form, There are entries in boxes I don't understand that reduce my tax liability. I'd have left these empty. They will advise on the proportion of your utility bills you can claim for. I use lots of electricity, so 50% of my electricity is allotted to business, but just 33% of the gas. HMRC won't advise you on things like this - they just want you to be reasonable, and you decide what reasonable means!

You can do this bookkeeping yourself, but if you are like me, you don't actually understand the implications of claiming for this, but not claiming for that. My accountant takes my receipts and invoices I collect (that I have already filtered, removing those that I don;t think are business related) and throws out even more - but sometimes reminding me some are missing. I repainted my studio, replaced the carpets after I had an accident with a cup of coffee that got thrown across the room. I put in some new lighting at the same time. I'd mentioned the accident and what I annoyingly had to do - the cost of the repairs comes off my profit, meaning I pay less tax.

One thing I would absolutely do though, is check your house insurance if you work from home. I changed mine to a new policy that covered my working from home business. We bought this house because it had been extended and had a brilliant space for my studio - safe and secure and all alarmed. Councils are generally happy for people to work from home - unless you have customers calling. I don't and this is insurance friendly. If you don't tell the insurers, it could be bad in the case of a claim.

 

[john1989]

VAT is probably a non-starter as clothing doesn't attract VAT, does it?
Clothing for children is usually zero rated, so it might well be worth registering voluntarily.

 

[talksalot81]

I would re-iterate the need to get in touch with a knowledgable insurance broker. The fact that you are importing from China makes me all the more firm in this. If you were importing from within the EU (keep this in mind when voting) you will very likely be covered, to an extent, by the manufacturers insurance cover (implied warranty and all that). However, with a Chinese import, I think you have basically nothing. I would suggest that you have a low risk of a high value incident (as opposed to a higher risk of a low value incident). As such, I would say that you will hopefully never have a problem, but if it did occur, the presence of insurance would be the only thing that would save you.

 

[@aiteoconsulting]

John, help me out here, as I'm not particularly clued up on import / export. If VAT on clothing is zero rated, then wouldn't registration still result in no recovery of input VAT on the clothes imported, but an additional VAT charge to (non-business) customers. What's the benefit of voluntary registration that I've missed?

 

[john1989]

John, help me out here, as I'm not particularly clued up on import / export. If VAT on clothing is zero rated, then wouldn't registration still result in no recovery of input VAT on the clothes imported, but an additional VAT charge to (non-business) customers. What's the benefit of voluntary registration that I've missed?

The benefit is that the sales to the customer are zero rated, but any VAT on purchases is recoverable (though will be limited if importing from China). But there's probably still some benefit to be had.

 

[@aiteoconsulting]

duh yes - the sales are zero-rated of course. I was only thinking about the purchase side...

 

[paulears]

Your VAT on the actual clothing would cancel out as you don't collect it or have to pass it on, but depending on which postal services you use, there could be a VAT component for say, Parcelforce, that could be recovered. In addition many of the secondary supplies you purchase for the business - computers, wrapping materials, paper, packing, computer software, accountancy, and possibly lots more would have VAT on them which would be recovered? Another thing to ask an accountant.