INSURANCE

INFORMATION FROM MATT BRYANT AT OCL ACCOUNTANTS

In running a bed and breakfast you will need comprehensive insurance to protect you, your customers, and your reputation.You are responsible for the welfare of your customers, suppliers, and any staff you employ.

• It’s important that your insurance includes public liability and employers' liability insurance in case somebody falls ill or is injured as a result of being on your premises.

• This is on top of the normal building cover in case of theft, accidental damage, fire or storm damage, and you also require cover for all your fixtures, fittings, and contents.

• Not to mention your guests’ belongings too.

• Additionally, you should have product liability cover as a safeguard against potential food poisoning, business interruption in case you are unable to trade for a period of time, an example of this is Covid-19, and financial cover for any money held on your premises.

The level of cover will need to be reviewed regularly as your business grows to ensure you have the correct level of cover.

The Advantages And Disadvantages Of Being Vat Registered

Advantages Of Vat

• You can claim back the VAT on purchases - this can be a huge cost saving of 20% on all purchases.

• Many agents or OTAs charge VAT and so you can claim this back - e.g. one of the agents I use charge me 22% + VAT = 26.4%.

• So if you plan to use these providers extensively this needs to be considered.

• Google and Facebook do not charge VAT on their ad spend in the UK.

Disadvantages Of Vat

• You need to charge VAT on all rental income.

• Since the majority of your guests (assuming this is the case) will not claim back VAT (individuals not businesses) then your fees will be increased by 20%.

• You will need to do a VAT return every month but this is very simple with most accounting bookkeeping systems.

Extra Vat Information

Can I register for VAT if my revenue is below £85k? Yes, it is still possible to register yourself for VAT even if your revenue is below £85k.

New Builds And Vat

If you have a new build you might be able to recoup the VAT even if you are not registered - this is the case when people buy new homes. You can also claim back up.

Property And Not Business

The £85k is related to the property and not your business. So if you own 10 properties charging less than < £85k rev per year, you do not need to be VAT registered.

Flat Rate Scheme

There is a flat rate scheme where you charge 20% but only need to send the government less than 20% (for hotels it's normally 8.5%). At the moment this is all changed due to covid - check the government website for further information: https://www. gov.uk/vat-flat-rate-scheme/how-much-you-pay

Use

Every B&B owner operates differently, you may just let bedrooms to holiday guests, but if you allow guests access to the kitchen cooking facilities, you maybe take in DSS/council referrals or you have a self-catering annexe this can completely change the type of policy you need to be on. Make sure you give your broker a full description on how you intend to run your business.

Check the small print

There isn’t a standard guest house policy. Every policy has very different policy terms, conditions and claim excess’s. Make sure you always check the finer points of any quote. An insurance broker worth their weight should help and point out any significant policy conditions or exclusions.

How much will you pay

It’s impossible to say what you will pay for your insurance as all guest houses have different requirements, sums insured and different postcodes. An example cost of a recent guest house policy we’ve set up…

• A 5 bed guest house in Gwynedd LL30, with buildings insured for £462,000 and contents at £85,000.

• Annual Premium: £628 with optional Legal Expenses £36.

• The policy had just a £150 claim excess, no security conditions and full theft by guests cover included.

Using a broker

More

Claim Excess

All policies will have a standard policy excess - this is the amount you will need to pay towards any claims costs. A standard excess should range from £100-£250. We don’t recommend going any higher than this unless you’re getting a significant saving by doing so. Look closely in policy conditions as sometimes higher excess’s can be added for example a flood risk area, flat roof excess’s, subsidence and similar.

Thefts

Most guest house policies will include theft caused by violent or forcible entry only. Some, more comprehensive policies, include full theft by guests, whether it’s a break in or if a guest just walks away with a tv. Check you’re happy with the level of theft cover.

Security

Some policies have no security conditions which makes it easier not having to worry if you have the correct locks, especially a hospitality business where guests are coming in and out all the time. Many policies do however have minimum security requirements, if so then make sure you can adhere to them.

Yes, we’re possibly being biased but we’d always recommend using an independent insurance broker, possibly a broker who specialises in hospitality trades. A broker should help find the correct policy for your needs, will be able to make any changes during the year, help with claims advice and be able to search the market again at renewal time. Also brokers don’t all have access to the same providers and schemes, so it’s recommended to try 2 to 3 brokers so you get a good spread of quotations.

How much should you insure your buildings for?

The buildings should represent the full rebuilding cost of the property including debris removal, architect and associated fees. If you have a mortgage they’ll often insist on you insuring for a certain amount. A free website you can login to and get an estimate of the rebuild is the BCIS website here: https://calculator.bcis.co.uk/ A more accurate way is paying for a chartered building surveyor, but will often be £500+ for this type of report.