Are you a company director?

Do you have life insurance in place to protect your family?

If so, you could be paying an unnecessary tax penalty. If you pay for this cover from your own bank account you will be paying from post-tax income, and if you are paying from the business account you will probably be taxed on the payment as if it were income.

Larger companies can avoid this by introducing 'group death in service cover'. This is a highly tax-efficient way of providing life insurance, but is not generally available for smaller companies.

However, recent changes in legislation have allowed small companies to benefit from this arrangement by taking out 'relevant life policies'. These can be written on an individual basis so are available to all companies no matter how small.

The tax benefits are:

Payments are made by the company with no benefit-in-kind charge back to you

No National Insurance implications

Possible tax relief as a business expense depending on your individual circumstances

Tax-free benefits to your dependants

They also provide great flexibility, so if you leave the company or retire, you can take over paying the premiums, and if you then start another company, you can move it there.

If you would like more information on how this valuable tax concession can be arranged then please request a call back here>>

What are the benefits?

Although the company pays the premiums, they are not normally assessable to income tax on the employee as a benefit in kind. This can be a significant saving, particularly for a higher rate taxpayer.

Unlike a registered group scheme, the benefit will not form part of the employee's annual or lifetime pension allowance.

These payments may be treated as an allowable expense for the employer in calculating their tax liability as long as the local inspector of taxes is satisfied they qualify under the "wholly and exclusively" rules.

Who are relevant life policies suitable for?

Small businesses that do not have enough eligible employees to warrant a group life scheme.

High-earning employees or directors who have substantial pension funds and do not want their benefits to form part of their lifetime allowance.

They are not suitable for the self-employed or equity partners, although their employed staff could be covered.

Are there any limits to the cover I can have?

The legislation does have some limits to qualify for the tax concessions, and to ensure these are met it is required that:

• The cover must be paid in a single lump sum before the age of 75.
  
• Only death benefits can be provided Benefits must be paid through a discretionary trust.
  
• Beneficiaries are normally restricted to family members and dependants.