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On benefits but want to become self employed

edited 27 November 2012 at 11:58PM in Tax credits & benefits for work
5 replies 27.9K views
ParcellusParcellus Forumite
3 posts
edited 27 November 2012 at 11:58PM in Tax credits & benefits for work
Sorry in advance, this is a bit of a long email, but it’s a totally honest, warts and all cry for some clear advice.
I am asking for some advice regarding my daughter Claire
So here is the situation:
Claire is a single Mum aged 30
Her daughter is 4 and just started school this September near Exeter
Claire receives housing benefit and some tax credit and lives independently with her daughter.
Claire unfortunately had a brain tumour diagnosed at the age of 8 which was successfully removed, but sadly left her with epilepsy. This condition really messed up her schooling and she did not get any qualifications as a result of that. She came through that a bit scarred but is a strong willed person with a positive attitude to life. Claire was receiving disability living allowance at the age of 18 and despite having fairly frequent seizures, did manage to get a job with JJB sports (all credit to them for being a compassionate employer)
Claire was living on her own and in due course met up with a chap and my granddaughter resulted from that. Sadly she was bullied in the relationship and had to flee to the South West (3 years ago) as a result of that. She found a very small place near Exeter with my granddaughter. Her seizures were well controlled by then, sufficiently so for the disability living allowance to be discontinued around the same time.
Claire is very good at arts and crafts and makes a few things which sell at local village markets for some pocket money. The most Claire has made in any year id around £400 which she has never declared to the authorities as it falls below the £20 per week where that would need to be declared as income.
Recently Claires granny died.
Claire stands to gain around £30,000 inheritance.
We realise that this will quite rightly need to be declared as there will be a termination of Claires benefits as that would be on the housing side above the £16,000 threshold.
The question is:
Claire would really like to become self employed and develop a craft business.
Claires chances in the open job market are poor due to her disability and lack of qualification. But she wants to make a future for herself and hopefully be free from state support in the long term. Being self employed is her best chance of achieving that.
She would like to use a chunk of her inheritance in developing a business. The financial outlay will be for some equipment, a workshop and storage. Because of her epilepsy, Claire cannot drive, so she will need some assistance with hiring transport.
So how does she go about this?.
Her business is unlikely to make vast profits during the startup phase, in fact may make a loss if the investment to get it up and running is taken into account.
Claire will put in every hour she can to producing the saleable items around being a full time single Mum
If she uses her investment to get the business going, will that be judged by the authorities as deliberate self deprivation?
We have scoured the web for some clear advice on this and have come away completely confused.
Please help
Thanks in anticipation
Parce

Replies

  • AnniseleAnnisele Forumite
    4.4K posts
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    (I'm assuming 'Kate' is a typo for 'Claire', and your daughter doesn't actually have either of those names? If not, who is Kate?)

    Putting the benefits aside for a moment, it's worth thinking about how profitable the business could be.

    When you say she "makes" £400 per year, is that before or after the costs of materials are taken into account? And how much time does she spend making things?

    I ask because it can be very hard to make the leap from creating things as a labour of love, to creating things to make a profit. Sometimes people will proudly sell items for £10 each and call that profit, but they'll forget about the £8 of materials and 4 hours of work - so they've actually worked for 50p an hour and they'd honestly have been better off stacking shelves in Tesco.

    Assuming she's got the 'working out profits' side of things sussed, and there's a viable business model in terms of time - how scaleable is the business? If she's (say) selling at craft fairs, and there are four craft fairs per year in her region, and she already goes to all of them, how would she increase her profits?

    Does she need the equipment and the workshop all at once? How is she making things now, and can she scale that up without incurring much additional cost?

    With some crafts, the people making the money are the people who sell the equipment and the materials, not the crafters. Is there any other way Claire could make money through arts and crafts? Maybe by teaching other people?

    You don't have to answer those questions here; I'm just putting them out there for you to think about - and apologies if you've already thought of all of those things. I do appreciate you've posted on the benefits board! Somebody from CAB should reply on the benefits point within the next couple of days.
  • Thanks for your reply Annisele

    Your point that my daughter income is not profit as it does include the cost of raw materials is well made. But the "bank of dad" has been paying for those. I think an additional point here is that pupose of engaging with work is not just to earn money, there is a really large psychological component to it as well. Given my daughters number of job application unsuccessful attempts, actually making and selling her own creations is a good way of maintaining her self esteem and is just generally "good for the soul". You are also correct in saying that she may as well be stacking shelves in Tescos. She did actually apply to Tescos to do that, but never got an interview. I think you may find that you need a degree to do that these days. However, your idea about teaching the skills and techniques is certainly worth thinking about. So thanks once again for your reply.
    All the best Parce
  • CAB_Birmingham_representativeCAB_Birmingham_representative Has MSE’s permission to post for company Organisation Representatives - Private Messages may not be monitored
    89 posts
    Parcellus wrote: »
    Thanks for your reply Annisele

    Your point that my daughter income is not profit as it does include the cost of raw materials is well made. But the "bank of dad" has been paying for those. I think an additional point here is that pupose of engaging with work is not just to earn money, there is a really large psychological component to it as well. Given my daughters number of job application unsuccessful attempts, actually making and selling her own creations is a good way of maintaining her self esteem and is just generally "good for the soul". You are also correct in saying that she may as well be stacking shelves in Tescos. She did actually apply to Tescos to do that, but never got an interview. I think you may find that you need a degree to do that these days. However, your idea about teaching the skills and techniques is certainly worth thinking about. So thanks once again for your reply.
    All the best Parce


    Dear Parcellus,

    Thank you for your enquiry.

    The rules behind ‘deprivation of capital’ can be quite complex to understand. The following information has been extracted from the welfare benefits and tax credits handbook:

    “If you deliberately get rid of capital in order to claim or increase your benefit, you are treated as still possessing it. You are likely to be affected by this rule if, at the time of using up your money you knew that you would qualify for that benefit as a result, or qualify more quickly”

    Due to the nature of your daughter’s enquiry, it may be in her best interest to visit her local bureau where she will be assisted further. There may also issues surrounding benefits and tax credits that we may be able to assist her with. Your daughter can enter her postcode into the following link which will inform her of her local bureau:

    http://www.citizensadvice.org.uk/

    Kind regards,
    Birmingham CAB
    Official CAB Representative
    I am an official representative of CAB. MSE has given permission for me to post in response to questions on the CAB Board. You can see my name on the companies with permission to post list. If you believe I’ve broken any rules please report my post to [email protected] as usual"
  • Thanks Sleepless
    The livewire link is very useful
    Parce
This discussion has been closed.

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