Starting a loss making business - is this the right thing to do?

Hi All,

I've been making jewellery more or less all my life, and have spent the last 5 years doing evening classes in various silversmithing techniques, and building up my home workshop.

I view this as a hobby. I work in IT full time, and tbh, quite enjoy it.

I've sold a few pieces of work when people have approached me, but I've never looked out opportunities to sell my jewellery.

However, I've got to the point where I feel I now have a "style" and a clear idea of the sort of stuff I like to make, and I'd like to take it further, and try and get my work into a shop or two, and set up a website.

I've done some reading, and it appears that if I'm going to have an online shop, then I need to set up as a sole trader, and run it as a proper business. This seems exciting, rather than daunting to me, but I'm wondering if it's really the right thing to do?

The thing is, even if my jewellery would sell like hotcakes (unlikely!) I am not going to be able to devote enough time to this to make large volumes of work, so any profit that I make is always going to be minimal, and likely reinvested back into tools, development of new designs, etc. I'm sure I'll end up spending more than I make, which I'm happy to do - I feel like I spend a fortune at cooksons at the moment, and I don't sell anything!

What I'm really looking for is a self-funding hobby, rather than a business. So is it right to start it as a business? I'm been reading about crackdowns on online trading, so don't want to risk incurring any fines for not registering, but I can't help but think that this isn't really a business.

I would appreciate any advice!

Fay

Hi Fay - If I were you, I would keep the day job (is part time an option?) to fund your jewellery making. It has always been tough out there but this year has been worse for a lot of artist/craftsmen that I know/speak to. Sales have dropped through the floor except for those lucky few who have commissions outstanding. New business seems hard to find. I know things will pick up again but in the meantime don't give up your job just yet.
Good luck!

Theresa

Thanks for the reply Theresa.

I definitely won't be giving up the day job, as there is just no way I could make as much money in jewellery. I wouldn't really want to anyway, as I do enjoy it.

I guess my question is really that given that I'm always going to be doing this on an evenings and weekends basis, do I need to set up as a sole trader, fill in self assessment tax forms, etc? Or would it be legal not to bother, even if I have an online shop, etc, if I'm not actually going to be making any profit?

On one hand, I don't want to skimp on paying my taxes, even if it is only a tiny amount each year. On the other hand, I don't want to end up spending as much time administering a 'business' as I do making jewellery!

Tax returns is the correct way to go, I'm afraid - so self-effacement forms year in, year out are the order of the day. It's not down to whether you make a profit (Or losses, which are tax deductible), it is whether or not there is income.

Oh, forgot to say, I do appreciate that "getting my work into a shop or two" isn't as easy as I made it sound! I realise that these must be pretty tough times for this sort of business, and this is an ultimate goal, rather than an assumption.

Quote:

---

Originally Posted by ps_bond

Tax returns is the correct way to go, I'm afraid - so self-effacement forms year in, year out are the order of the day. It's not down to whether you make a profit (Or losses, which are tax deductible), it is whether or not there is income.

---

Thanks for the reply, that's what I suspected.

It just seemed potentially dodgy - e.g. my understanding from what I've read is that if I spent a grand on a rolling mill, and then only sold 3 pendants in a year, then I could end up with a tax rebate on the amount I pay through my day job, since I'll make a loss in my business. That just seems wide open to abuse!

Making losses in startup isn't a problem - but I think if you persistently made large losses, with no downward trend, that might trigger an investigation. Dialogue with the tax office is good thing - despite the image they end up with, they're frequently very helpful.

On the flipside, if you pay higher-rate tax, when you make a profit you suddenly you have to pay 40% of that over, so it's swings & roundabouts.

Thanks for the advice Peter, that's very helpful.

Like you I am full time in IT and would like the jewellery making to be a self funding hobby. I opened an online shop in Sep 2010. I registered for self assessment as a sole trader from that date as the Tax Office said I needed to. I put in my first tax return for 2010/11 in Jan this year, there were no sales at all that year so technically everything I spent was a loss - and ended up with a small tax refund as tools could be put through as a separate item. Don't know if the tax office will ever start questioning things, I'm just going to see how things go from here but fully expect that the jewellery is "offset" against real salary (possibly forever). That's the end of my "two cents"! :)

Well you better get ready to send me emails to HMP then. I havent registered with the Tax Office and have no other income, apart from 4 rental properties that just about pay their own way, apart from pension and hubbies wages which are just about enough to pay our way. I also make silver jewellery for a hobby, and have sold in the last two years since I started jewellery making about £200 maximum, my tools and stuff have cost a lot, and so does my website and have had no sales from it so far. If sales start taking off (which I doubt) I will then have to register. I have a separate bank account for the silver side and have kept every invoice but if it wasnt for hubby's wages, I would have to stop making stuff.