business protection & relevant life

Business protection could help your  business to continue to trade should a key person or the business owner die or become terminally or critically ill. Proceeds from the policy could help ensure that key individuals are replaced, corporate debt is protected and shares from the deceased partner’s/director’s estate are purchased.

 

Life protection for individuals in a business work in a very similar manner to Life Protection in a personal environment with ‘Whole of Life’, term protection and cover in the event of a critical illness.

It is important to consider protection for your business as it provides evidence of best practice and demonstrates an effective disaster recovery strategy.

 

what is a relevant life plan?

A Relevant Life Plan is a term assurance plan available to employers of a Limited Company to provide an individual death in service benefit for an employee, it’s an alternative way for employers to provide death-in-service benefits for their employees outside of a registered group life scheme. It is designed to pay a lump sum if the employee dies whilst employed during the length of the policy.

The policy may also payout if the employee, whilst employed, is diagnosed with a terminal illness. Relevant Life Plans are similar to most other types of life cover except they aim to provide a tax efficient benefit provided by an employer for an employee. A Relevant Life Plan is designed to be written in a trust at outset, with the employee’s family and dependants as beneficiaries.

What are the advantages of relevant life insurance

It is tax-efficient for the employee as HMRC views the premiums as an allowable business expense for the employer and not a benefit-in-kind for the employee. Therefore the employee does not have to pay income tax or national insurance on the premiums – for a higher or additional rate taxpayer, this can be a significant saving. The employer also benefits through claiming tax relief on the premiums as part of the employees remuneration.

In addition, with the benefits written into trust on behalf of the employee, they are not viewed or taxed as business assets in the event of a claim. As with other life insurance policies in the event of a claim, the benefits are not subject income tax or subject to an inheritance tax liability as the policy is written into trust.

Example
Non-Relevant Life Plan
Relevant Life Plan
COST TO EMPLOYEE
Monthly Premium £100.00
Employee National Insurance Contribution £2.56
Employee Income Tax £25.64
Employee Dividend Tax £0.00
Gross Earnings Needed £128.21
COST TO EMPLOYEE
Monthly Premium N/A
Employee National Insurance Contribution N/A
Employee Income Tax N/A
Employee Dividend Tax N/A
COST TO EMPLOYER
Monthly Premium N/A
Employee National Insurance Contribution £17.69
Total Gross Cost £145.90
Less Corporation Tax £58.36
Tax Adjusted Total Cost £87.54
COST TO EMPLOYER
Monthly Premium £100.00
Employee National Insurance Contribution N/A
Total Gross Cost £100.00
Less Corporation Tax £40.00
Tax Adjusted Total Cost £40.00

To find out more, call us on 01932 253939 or email us at info@bigmoreassociates.com © 2018. Bigmore Associates.