Had a search and this doesn't seem to have been asked before.

On Friday I take possesion of the keys of a house I am planning to renovate (and then sell).

I understand that the Bank want normal building cover as they are helping me finance the project but I need to properly understand what other liabilities I have.

The house will be unnocupied for the period of the renovation and therefore the only buildings cover I can get is Property Owners liability which only covers for Fire, lightening, Earthquake and Aircraft Strike.  I am still not clear whether this also covers me for any damage to neighbouring properties (people) that I might cause.  

I will be doing a lot of the work myself and am expecting any subbies to carry there own insurance (Do I need to confirm this with them?).  However I will be getting my son's (and probably some of their friends) to help me strip the place out.  Does this mean I need to go for contract works cover as well to cover me if they get injured whilst helping me?

Any pointers in the right direction gratefully accepted.

Cheers

Martin

It might be worth contact your local HSE office or take a look for booklets on their web site...

http://www.hse.gov.uk/

Example:
"The absolutely essential health and safety toolkit for the smaller construction contractor"

http://www.hse.gov.uk/pubns/indg344.pdf

Thanks for the replies so far.

It's not proving that easy at the moment sorting this out.  I have had a couple of quotes but that only seems to be for FLEE (Fire, Lightning, Explosion, Earthquake) plus what is known as Property Owners Liability.

As I understand it this should be enough to both insure the building to the bank's satisfaction and give me a personal liability insurance.  It doesn't seem to cover public liability (i.e. cover any helpers/subbies that I cause injury to).

Am I correct in saying that if I do a search for "public liability insurance" on google I should find something?  What sort of figure will I be looking at?

The building insurance is looking to be somewhere between £300 and £400 with a pro-rata rebate when I sell the property.

I have found one all singing all dancing policy which seems to cover absolutely everything, however it is a 2 year self-build/renovate policy which costs £615 and there would be no rebate.

As far as CGT is concerned then there is no way round it unfortunately.  We are selling a rental property to help finance the project and will have used up CGT allowance for this year

It is a moot point as to when this changes from being a "project" and turns into a business as far as the revenue is concerned.  If this is succesful (i.e. it doesn't lose me any money) then I will buy another house to renovate.  My accountant seems to think that the revenue doesn't seem too concerned if someone does 2-3 houses a year, what do you think?

Cheers

Martin

Nothing to do with insurance in this reply. More to do with the tax side of property development.

If you buy a house and do it up and make a profit out of it then you can be liable for CGT.

However if you are planning on doing this as a trade, then if you register as self employed/sole trader than you are only liable for income tax. You might be liable for CGT on your first house though until you can show you are trading.

Deciding on which path to take depends on the number of properties you plan to do and whether or not you are higher rate tax payers. With CGT you get your annual expemption of approx £8k, and £16k for married couples. Though if one is not working/a lower rate tax payer you can split the profit up 90%/10% since you pay CGT at the rate you pay income tax at. With income tax there is a lower limit (approx £4k) but you can offset development costs against the profit.

Note that I have only started to research into the details of the two methods so I might have got some details wrong or even got it totally arse about face so doin't believe a word of what I have said, check it out yourself, though please let me know if I have got it wrong.

See http://www.property-tax-portal.co.uk/taxarticle8.shtml for some info.

[quote author=CWatters  link=1121684043/0#5 date=1121983153]
If you think you will need to buy a lot of materials it might be worth setting up a company and registering for VAT so that you can reclaim VAT you pay on materials. Self Builders can only claim back VAT on new builds.

I don't know if setting up a company to do this has other benifits eg CGT vs Taxation on company profits?

[/quote]
I Set up my ltd company for this reason, (to avoid CGT), Unfrotunatley with Refurbishments you can not claim the VAT back on materials used because the sale of houses are zero vat rated - (as CWatters pointed out).  However it is easier to claim all expenses associated with the refurbishment and then you only pay corporation tax on the profit and can take payment in the form of dividands, which saves you on national insurance contributions and is not affected buy how much you earn. - there are binds with the company though - Accontants - Employers liability insurance but IMO though, if you make a good profit 15K + then you will be saving a fortune on tax. and a good accountant can save you even more.
As for doing 2-3 propertys a year - i wish - in my expirience by the time the effing solicitors have pulled thier fingers out you have to add 4 months to the project per house to sell and buy, so unless your cash flow is very good and you can buy 2 houses at the same time you'll be lucky to do 2 in a year - so far for the last 2 years i've only managed 2, but some of that was due to my solicitor poping his cloggs a few weeks before we completed - but that another story.

MJC - how do you finance these projects - don't want to pry -just interested  - the only way i've managed so far is re-mortgage to release equity - (which is bum clenching time). then business overdraft and business loan - but the loans will only go as high as 65% LTV, which makes cash flow very important.

[quote author=HandyJon  link=1121684043/0#9 date=1122403147]

Small tip here. If you have set up a company with only you and a partner then you are the employers AND you don't have any employees. So are you going to sue yourself if something goes wrong?   And who's going to take you to court because you don't have ELI. Hint, it won't be the DTI. Unless someone else stipulates it, like another insurance company, then don't bother with ELI. [/quote]
I just thought it was a legal requirement.. I always thought that if I fall out with the missus and she take me to the Cleaners via the divorce courts - i'll sue the arse off her as my employer