Starting a new business if on PIP

MaisieD · 21 May 2019 at 4:59PM

Hi.

I have chronic illness (ME/CFS) and PTSD due to a trauma, I was attacjed 6 years ago. Anxiety and agoraphobia so I rarely leave my home. It's tough and life can be pretty lonely.

I've recently started knitting and made blankets to send to friends. I can do this on my less fatigued/pain days and its given me a bit of me again. I've been unwell for years but only applied for PIP last year and was granted it for 5 years. Its helped me a lot.

A friend of mine said I should start a little business and make my knitted blankets from home while I rest. It has helped me so much to feel less anxious and low. I have looked into it but to buy wool at trade price I'd need to need to have registered as a small business. Can anyone advise me how to do this to get a VAT number?

Will this go against me in some way with PIP? My circumstances physically bacent changed. I still can't get out, still have anxiety and panic, still need help physically with cooking etc. I'm worries I wont be able to do this if it will go against me with PIP and they assume I'm better because I'm knitting. Any advice please?

I suffered such awful depression last year because of my situation with my physical health and life being so limited, this is the first thing I've felt excited about for a long time and my depression has been much better since I accepted my health conditions and im making the best of my life now no matter how limited my life can be at times.

Sorry this got so long. Hope it makes sense.

Maisie

lincroft1710 · 21 May 2019 at 5:11PM

Your turnover will be so far below the VAT threshold, you will not need to register for VAT. If you do register, you will have to add VAT to every blanket you sell, which could make you uncompetitive and thus hamper sales. Not to mention all the extra work involved with VAT returns

MaisieD · 21 May 2019 at 5:26PM

Thank you so much. My husband has said the same, he said I've no reason to register but I guess that means I cant buy wool at trade prices which is a shame as it's expensive.

00ec25 · 21 May 2019 at 6:00PM

MaisieD wrote: »

Thank you so much. My husband has said the same, he said I've no reason to register but I guess that means I cant buy wool at trade prices which is a shame as it's expensive.

I suspect you don't really understand what is meant by "trade price"

it has nothing to do with whether you are VAT registered, it has everything to do with what sort of price the supplier will sell it to you for because you are going to be a regular customer or buy a lot and so get a discount

please appreciate that VAT adds to costs:
if you buy wool at £10 + VAT you will pay £11.20
you will then claim back £1.20 of VAT from HMRC
BUT
you will sell your blanket to your customer for more than £10 and you will charge VAT on that, so sell it for £12 + VAT and your price is £14.40 of which you will pay £2.40 to HMRC

net position pay 2.40, claim back 1.20, you end up having to pay HMRC a net amount of £1.20 on every blanket sold.

Overall profit £14.40 - 1.20 - £10 = £3.20
Being VAT registered is not always a good move ...

Savvy_Sue · 23 May 2019 at 12:52AM

To be honest, you might only find the trade prices look better because they are being quoted net of VAT. If you were VAT registered, you'd pay the price PLUS VAT, but you'd be able to offset that VAT against your sales - which would be 20% higher than if you weren't VAT registered.

Plus, I'd have to wonder how much demand there is for knitted blankets on an ongoing basis at the kind of price you'd need to charge just to cover the price of the wool. Maybe I'm wrong, but there's quite a lot of work in a blanket!

Mistral001 · 23 May 2019 at 11:30AM

Go to the suppliers before doing anything. The form of your business, whether sole trader, or Ltd company might matter to some, but as has been said it is the quantities that they will be most interested in.

I would start with your present suppliers. You presently have commercial relationship with them after all. Explain the situation to them. Ask them for a discount. The price might not be as low as wholesale prices, but at least it could get you up and running.

Starting a new business if on PIP

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