You will be pleased to know that the above benefits extend further, as they are NOT all classed as a benefit in kind to you, and are tax deductible*, which in turn will reduce your corporation tax bill too. This is simply efficient life cover. There are many considerations when taking a ‘hope for the best plan for the worst’ approach;
- Do you have any business liabilities (e.g. Loans, Credit cards, overdrafts, property) – Would you want them paid off should something happen to you?
- What is your worth to the business? – Should you be in a partnership, and one key member was to die, how would this impact your business?
- If you were off long term sick, have you made provisions for another qualified member to take your place? – Should this potential eventuality occur, would you want to use company money to replace you? And how long would this be financially viable for?
- How would you family feel having to deal with your company financial affairs? – Or, would this even be viable practically?
Until now, directors of smaller companies have missed out on this as it has not been possible to have a one-man scheme, and group risk providers are unlikely to cater for less than 5 members. Company directors have been paying for personal plans from their post-tax income or from the company account. If it’s from the company account then the payments would normally be treated as income in the hands of that director and taxed accordingly.
But following recent changes to group life legislation, protection specialists have recognised there is a vast need and have introduced a plan targeted at single lives and small companies. You can cover a single director for up to 15 times their remuneration (including dividends) using ‘relevant life policy’ legislation.
The tax treatment is similar to a registered group scheme with the added advantage that benefits do not impact on lifetime pension allowances, so are ideal for high earning directors who might be facing this problem.
Many of our clients already have a form of protection in place which is fantastic, however we would strongly recommend that this is reviewed on at least an annual basis as it’s important to ensure your cover matches your business requirements. It is very common to have a plan that has not been reviewed for many years, which was not placed into trust, or indeed be too high / too low for what your company looks like today. If this is the case we can have an adviser check this over for you free of charge.