Query about selling craft-work

I am on ESA (support) and PiP (Enhanced Care, Standadrd Mobility).

When my disabilities allow, I do a little craft work - sewing, knitting, sketching...that sort of thing.

Now, a few days ago an acquaintance came for coffee with Mum, and I was there with my knitting....The acquaintance expressed an interest in my work...I was knitting a hat for myself.

She then said that she runs a market stall and does car-boot-sales. She asked if I would like to make some more hats and she would sell them....She thought the hats would sell well ...and we would split the money 50/50.

I thanked her for the nice words about my hat, but pointed out that I cannot guarantee any number of hats...one day I can knit, and then maybe 3 or 4 days my hands don't allow the work...also, I am not sure of the law on someone on disability selling stuff. (Actually most of the talking was done by my carer/Mum...but you get the idea!)

She smiled and said that a number of people on benefits sell stuff at the market - and many more at the car-boots. She said that it is quite permissible for someone to make a craft item...eg I can knit myself a hat....it is quite permissible for someone to make an item as a gift ...eg I could knit a hat, say, for Mum....so all that people do is make their items, and then gift' them to this woman who then sells them as her own items. She gives the share of the price as 'payment of materials'

Now, I know that I could never make enough items to sell. ....and I am also compulsively honest! (I would want to declare every item sold)...but it led me to look online and there really doesn't seem to be any official ruling...

What is the actual law regarding selling items that you have made?