Mooloo's "Making my future, one stitch at a time"?

mrmechanic

Time to have a rethink on the way you run your business.
Somewhere along the line there is going to be problems for you if you are not getting a wage from your business.
You cannot put in the time and effort without getting any financial benefit,
Even the tax man will be looking rather suspicious at your profit and loss accounts where you are making money but paying it all out again on staff wages and overheads without anything left over for yourself.You would be an ideal candidate for a tax investigation.

I have said it before along with others, you should be the first priority for wages, your wage first before you think about employing and paying anyone else.
Only once you are getting a weekly wage every week can you then look to see if the business can stand another employee and wage.
If not, then you need to get your head down and do it yourself.
This is the only solution that is going to work for you.
Any benefits you claim along with your tax liability will all look carefully at your business accounts.
If the business has a steady turnover, then they will assume you are making money.
And will expect to adjust the amount you claim or pay.
Sorry if i seem a bit blunt, but seen this coming for a while now.
Its time for you to turn things around now starting with the staff you employ.Let them go while you still have a business.

Savvy_sewing

I suppose what comes to light also is the fact that I have bought stock, over the year that I didn't start off with. The shop has quite a considerable amount of goods for sale that I have purchased through the year, rather than paying my self a wage.
I have had a chat with one of my Ladies who was in yesterday, she was willing to reduce her hours by one afternoon, which will help, and the decision I have made is to ask the young girl to leave as there is currently not enough work and she does have another job as well.
I will discuss the possibility of her being self employed and if we have a busy time and she wants to come back on that basis she could then invoice me for the time when she works only, and not have to pay her holidays and be responsible for the tax etc for her.
This would mean that I could pay me some of that money instead.
This coming year I don't have to spend on any clothing for the shop, that really hasn't paid back much in return. I still have cupboards full of clothes to shift, hopefully via second hand selling sites.
The pattern cabinets are full, but need promoting that I have them. I will also reduce the books and stop the McCall and vogue patterns, that will save £200 a year.
So looking at all the spending in detail and I am confident that I can reduce the spending in this second year, and hopefully the work will steadily be coming in. September saw the highest in sales so far dispite the last week being a little quieter.
I shall have a keener eye on things from now on.
My own fault for not watching the bottom line but hopefully I will now be able to keep making changes for the better.

The housing were quick to write to me to tell me that I am now in rent arrears and that I must pay it immediately.
The amount is one weeks rent, that was due on Monday. So I'm 6 days late and yet I actually have a monthly DD set up with them so they could clearly just take it then?

Eager_Elephant

If your profit for the year equates to £34 per week then either they have not read your accounts properly or they have not allowed some of your expenditure - Housing Benefit are not so generous on self employed expenditure as HMRC.


Hopefully you will get your notification letters soon and then we can work out what has gone wrong.


Just remember that the wage you take from the business is not the income that HB will use for you - they will still look at your year accounts and will use the figure from that.


Just another thought - when you listed staff wages have you made it clear anywhere how many staff you have? Just wondering if you just listed it as wages and they might think this is your drawings from the business rather than paying to staff - if so they would remove this from calculation and then add that on to the profit hence giving you a higher income figure?

BigAunty

Mooloo wrote: »

No I haven't received their calculations but the profit and loss acc shows £1,792 for the year which divided up gives me £34.40 a week

I do get tax credits and that is what we are living on. .

If that estimate is correct, you currently net in profit around half of what an adult gets on Job Seekers Allowance....

Are you aware of the significant changes that have come in for the self employed who receive Working Tax Credits? I don't know don't the details but it's generally about the SE having a viable business in order to be entitled to tax credits.

Are you aware of the big changes that come in for the self employed when the Universal Credit system goes live (if it ever gets rolled out...). The govt are concerned about the long-term benefit dependency of the self employed. Under UC, tax credits are scrapped and there is an expectation that the self employed can earn at least the National Minimum Wage from their businesses. The self employed can expect greater conditionality for receiving UC than under the current tax credit system.

If you are not aware of the changes, pop over to the Benefit board with your figures and general circumstances and the forum members there will advise how you might be affected.

bluesparkles

When Ive spoken to HB in the past (not that long ago either), they basically said that their calculations were based on what you had coming in and less on what was going out.

If your profit every week is only 34 pounds Id expect that youd get full or pretty near full Housing Benefit.

But as others have said on the boards, you are potentially making more money than that, but are paying staff before you take a wage. You should be paying you first, anyone else second. Particularly if their wages would cover the shortfall in Housing Benefit that you've not long posted about.

grey_lady

Mooloo has a couple of other benefits coming in though that she hasn't mentioned which the HB office have probably taken into account.


To be fair it isn't up to the taxpayer to subsidise all this.

bluesparkles

Some benefits aren't counted for Housing Benefit purposes (I think I'm right in saying that). To be honest, so much of what's written on here sounds as if the OP is just muddling along. I cant understand why you would put yourself into poverty while employing people and I do understand you can't do everything yourself, but there have been months where it looks like your income has been very healthy indeed, yet your outgoings have left you with a profit of 34 pounds a week.

I take my hat off to anyone who tries to start a business in this economic climate, but I think its time to take a good hard look at where all your money is going. Everything. Loans to your kids, shopping bills. How much money you fritter or don't fritter.

It just seems odd that a business which has had a healthy turnover in parts over the last year has ended up with such a low profit.

Plus, your employees will have bills to pay as well, I honestly wouldn't like to work hard for a company and then be told I'm being let go just because my employer has had a cut in Housing Benefit.

There are support systems for new businesses, I hope you manage to tap into them and get some advice about how to maximise profit so that you'll be able to come off benefits and be self sufficient sooner rather than later.

Eager_Elephant

BigAunty wrote: »

If that estimate is correct, you currently net in profit around half of what an adult gets on Job Seekers Allowance....

Are you aware of the significant changes that have come in for the self employed who receive Working Tax Credits? I don't know don't the details but it's generally about the SE having a viable business in order to be entitled to tax credits.

If you don't know the details then don't comment - Mooloo does not need scaremongering.


Tax Credits were going to introduce a minimum level of income so if you said you were self-employed for 30 hours a week your declared earnings had to be 30 x minimum wage - they did not introduce this. Instead the one requirement is that you must register as self-employed with HMRC and have a UTR number.
They can also investigate you if they think your business is not viable and you are only running it as a hobby - they have always been able to do this and have done so frequently so this is not a new thing from them.

Are you aware of the big changes that come in for the self employed when the Universal Credit system goes live (if it ever gets rolled out...). The govt are concerned about the long-term benefit dependency of the self employed. Under UC, tax credits are scrapped and there is an expectation that the self employed can earn at least the National Minimum Wage from their businesses. The self employed can expect greater conditionality for receiving UC than under the current tax credit system.

If you are not aware of the changes, pop over to the Benefit board with your figures and general circumstances and the forum members there will advise how you might be affected.

Universal Credit is unlikely to affect Mooloo or most parts of the country for years.
At the moment Universal Credit, in the areas which even have it, are limited to single people who are British Citizens and about another 20 requirements.
In one town in the country (that started the pilot 2 or 3 years ago) they have allowed couples with no children to make claims - if it progresses at this pace we'll all be dead before we have to claim it!! (in one street in one county they are moving everyone to Universal Credit - this is a pilot only.)


I know Mooloo does not mind these comments as she posts about her life and accepts these comments but posts should be supportive and with constructive criticism rather than criticism about her reliance on benefits,.
Lets not forget that there are 1000's in Mooloo's situation but because they don't post about it they don't get negative comments.
Mooloo is trying her hardest to start up her business which fits in with her family life and in which she is qualified - I think more credit should be given to her.

Lets not forget the Government are all about people starting businesses to help the economy and even Jobcentres are pushing people into unviable self-employment just to get them off benefits - the Government cannot have it all ways.

BigAunty

Eager_Elephant wrote: »

If you don't know the details then don't comment - Mooloo does not need scaremongering..

I am doing Mooloo a massive favour by highlighting her need to gain knowledge in the area of actual and proposed changes to the self employed.

I am not feigning expertise in the area, I made that clear, and I guided her towards the relevant forum.

As it happens, I do have above average knowledge of the benefits system. She'd just be better off posting her circumstances directly on the benefits forum away rather than contained within this thread, as they need specific facts in order to be able to flag some likely changes and risks.

Forewarned is forearmed.

Eager_Elephant wrote: »

posts should be supportive and with constructive criticism rather than criticism about her reliance on benefits,...

I have not criticised her reliance on benefits - the comment about the self employed's long term reliance on benefits comes from the Govt whitepaper on UC.

Eager_Elephant wrote: »

Tax Credits were going to introduce a minimum level of income so if you said you were self-employed for 30 hours a week your declared earnings had to be 30 x minimum wage - they did not introduce this.

They can also investigate you if they think your business is not viable and you are only running it as a hobby - they have always been able to do this and have done so frequently so this is not a new thing from them ...

In the budget this year, the HMRC actually did introduce tougher conditionality for the self employed, bringing in the requirement that the business is 'genuine and effective' and can be shown to be 'commercial' and 'profitable'.

Yes, the HMRC always had compliance investigations but were much more limited towards challenging whether the self employed WTC claimants were genuinely spending x hours per week on their businesses. Now their investigations are not just concerned about time spent on business activities but on whether their business is viable.

It used to be enough to prove to the HMRC that you were busy for x hours, regardless of profit, but now it is not! This is a massive change and you have done her no favours by reducing the scope of the change merely to the requirement to have a UTN.

The minimum income floor - which was mooted and then dropped from the latest tax credit changes - is a core part of the UC system.

In the govt docs I read that oulined the proposed introduction of Universal Credit made clear that they expect the self employed who do not make the minimum income floor to consider options including winding up their businesses or seek regular employment on top of it.

Now UC may never be introduced, or not be introduced for years, or undergo substantial changes but it remains a risk to self employed tax credit recipients.

There are two parts to risk - likelihood and impact. It is indeed debatable whether UC is going to be implemented. However, if it is, the impact on the self employed is going to be high.

Mooloo also has the Living Wage, increased NMW to her staff, to contend with as well.

Savvy_sewing

Thanks for the comments.
I realise that I raise a bone of contention with the fact that I still have to access benefits.
The business is young, I am learning on the job, and adapted according to the demands of the Customers that come to my shop.
There is little profit showing, but there is now a considerable amount of money tied up in stock and machines.
Yes the rent is high, and paying people to help me was my choice so that the turn over in the jobs was swift, and fit with people's expectations.
I couldn't physically sew any more than I was doing, and it meant that I would not have been able to offer the teaching workshops etc if I was still a one man band.
I agree that I have muddled along, and not been hot enough on the profit and loss margin. Obviously now I am trying to analyse the business with the year trading under my belt.
I agree that by helping my family I have left myself short, and that this week was probably not the best one to have used my savings on the parking out the front, but it is done now and I have the skills and the knowledge to cut our expenses etc both here and in the shop.
The work has slowed and I don't think that I can pay a wage to the young girl just to get her to tidy and do the odd jobs as they come in. When I first employed her she was self employed as she works in theatre etc.
By asking her to go back to self employment when/if there is work only, it means that she would invoice me rather then be on the wage bill. That will mean I don't have to pay holidays and a pension for her.
That will mean if we still get enough work in that I can do myself and not employed her I would be able to take a small wage eventually.
I work hard, from 9am - 5pm 5 days a week in the shop, I do work at home too. But I need the extra money that the sale of accessories etc help with to make the difference.
The worry I have is not expecting the council to have stopped my benefit completely. I still do pay part of my rent etc based on their version of the facts and figures last time they did an assessment. But wasn't expecting it to stop.
It will of course mean an adjustment in the way I live, etc and what help I may or may not get later. I was aware Tax Credits were changing, and think I had said sometime back that I would loose a lot when it did.
I also had hoped that by the end of the year I would be in a position to start to pay myself a wage, but I admit it has taken longer than I thought as I took on staff earlier then expected to meet the demand of the customers.
If I have to pay myself first, then I suppose I will have too, but at the moment that would mean that I would have to reduce the service I offer and would not be able too restock and offer such a variety too the customers.
I have already made changes to the clothing side, and will not be purchasing clothing for resale anymore, but by selling clothes agency style for others I hope to still have an income from clothes.
Time will tell.
I will try to find business advice from professional sources as soon as I can.