The Tax Advantages for your clients

1. Relevant life Policies
Presented by Michael Cooke

2. Supporting the Family
Death In Service
• ‘Registered’ –
- Group Schemes
• ‘Non-Registered’
- Stand Alone Relevant Life Policies
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3. • Company pays
• No P11D charge
• Normally corporation tax relief on premiums
• Generally tax-free benefits under trust

4. BUT
• Not available for a smaller companies
• Not available on a single life basis
• Can be inflexible
• Come under pensions scheme rules
• Lifetime allowance trap for high earners

5. • Premiums paid by the employer
– No P11D charge on the employee (S247FA04)
– No National Insurance Contribution charge on employee or employer
– Subject to the local inspector of taxes accepting that the premiums are 'wholly
and exclusively for the purpose of trade' as part of the remuneration of the
employee, they may qualify for relief as a trading expense.
– Do not form part of pension annual allowance
• Benefits paid
– (usually) tax-free under a discretionary trust
– Do not form part of pension lifetime allowance

6. Who is it aimed at?
High earning employees
- who don’t want their death-in-service benefits
forming part of their lifetime allowance
Smaller employers
- where there are too few employees for a group
scheme or just the directors are to be covered
Topping up other scheme benefits
- Where the holding group scheme is unwilling to
offer enhanced benefits

7. Premium required by Joe £1,000
Company Gross cost
Employees NIC @ 2% 34
Income Tax @ 40% 690
Employers NIC @ 13.8% 238
Total gross cost to company £1,962
Company Net cost
CT relief at 20% 392
Net cost of £1,570
* Assumes 40% tax-paying employee and 20% corporation tax paying company. Tax rates 11/12

8. Premium now paid by company £1,000 £1,000
Company Gross cost 36% -
Employees NIC @ 2% 34 saving
Income Tax @ 40% 690 NIL
Employers NIC @ 13.8%
Total gross cost to company 238
£1,962 £1,000
Company Net cost
CT relief at 20% 392 Assumes 40% tax-paying employee and 20%
corporation tax paying company
Net cost of £1,570 *Corporation tax relief on relevant life
policies assumes payment is acceptable to
local tax inspector as trading expense
Tax rates 11/12

9. Premium now paid by company £1,000 £1,000
Company Gross cost 36% -
Employees NIC @ 2% 34 49%
Income Tax @ 40% 690 NIL
Employers NIC @ 13.8% saving
Total gross cost to company 238
£1,962 £1,000
Company Net cost
CT relief at 20% 392 200 Assumes 40% tax-paying employee and 20%
corporation tax paying company
Net cost of £1,570 £800 *Corporation tax relief on relevant life
policies assumes payment is acceptable to
local tax inspector as trading expense
Tax rates 11/12

10. What are the restrictions?
• Benefits must provide a lump sum on death before 75
• No surrender value
• No other benefits can be provided
• Benefits payable via discretionary trust to dependants
or charity
• Not to be set up for tax avoidance purposes
Part of the Royal London Group
A group of specialist businesses where the bottom line is always financial sense.

11. Setting Up RLP
Company Insures employee
trust In the event
discretionary
dependants
of death
Claim paid to trustees ONLY
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12. How does the trust work?
Discretionary trust
• Paid to dependants at the discretion of the trustees
• Nomination form can be used
• No income tax
• Paid free of inheritance tax
Possible periodic charges may apply
• Must be issued under trust from outset
Part of the Royal London Group
A group of specialist businesses where the bottom line is always financial sense.

13. What cover?
• Normally the insurers will cover up to
20 x remuneration
Could include dividends, benefits in kind and bonus
They will also require proof of income for £2 million +
Can be level, or increasing
Part of the Royal London Group
A group of specialist businesses where the bottom line is always financial sense.

14. Do we have a replacement policy option?
• We don’t need one as it is a single life policy
• The trustees just appoint policy back to employee
• Better and cheaper than most group scheme
options

15. Transfer to a new employer
Can the policy be transferred to a new employer?
• Yes – the new employer just pays the premiums
• We would suggest a change of trustees

16. Who is it aimed at?
Not just for directors of limited liability companies –
but the life assured must be an employee of a:
• Sole trader
• Partnership
• Limited liability partnership
• Limited company
• Charity