Let The Taxman Help Pay For Your Life Insurance Rlp Aug 2011


Published on

If you’re a company director and you have life
assurance in place to protect your family, you
could be paying more tax than you need to.
Relevant life policies are a way of providing death in service
benefits on an individual basis no matter how small your
business is.

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Let The Taxman Help Pay For Your Life Insurance Rlp Aug 2011

  1. 1. Let the taxman help payfor your life insurance.If you’re a company director and you have life Who are relevant life policies suitable for?assurance in place to protect your family, youcould be paying more tax than you need to. • Small businesses that do not have enough eligible employees to warrant a group life scheme.Relevant life policies are a way of providing death in service • igh-earning employees or directors who have Hbenefits on an individual basis no matter how small your substantial pension funds and do not want theirbusiness is. benefits to form part of their lifetime allowance.What are the benefits? • hey are not suitable for the self-employed or T• Although the company pays the premiums, they equity partners, although their employed staff are not normally assessable to income tax on the could be covered. employee as a benefit in kind. This can be a significant saving, particularly for a higher rate taxpayer. Are there any limits to the cover I have?• Unlike a registered group scheme, the benefit will not The legislation does have some limits to qualify for form part of the employee’s annual or lifetime pension the tax concessions, and to ensure these are met: allowance. • The cover must be paid in a single lump sum• These payments may be treated as an allowable before the age of 75. expense for the employer in calculating their tax liability, • The policy must not have any surrender value. as long as the local inspector of taxes is satisfied they • Only death benefits can be provided. qualify under the ‘wholly and exclusively’ rules. • Benefits must be paid through a discretionary trust. • Beneficiaries are normally restricted to familyIn most cases the benefits are paid free of inheritance tax members and dependants.– provided the benefits are payable through a discretionary • The policy must not be used mainly for thetrust. purpose of tax avoidance.Protection insurance can’t stop the unthinkable happening,but it can make dealing with the consequences easier.Without adequate business protection you could end uprisking everything you’ve worked so hard to achieve. You could save 49% on the cost of your business protection. Source: Assumes 40% tax-paying employee and 20% corporation tax paying company and payment is acceptable to local tax inspector as a trading expense. Tax rates 2011/2012.
  2. 2. Protection doesn’t need to becomplicated. We make it easy.What are the advantages of using a discretionary If you have any questions about anything you havetrust? read here, please contact• There are restrictions in the legislation as to who benefits Chartwell Financial Services Ltd can be paid to. The use of the trust is the most practical Lindley Court way of ensuring these requirements are met. The Scott Drive beneficiaries who could be included are usually family Altrincham members and dependants. WA15 8AB• Having benefits paid through a trust ensures they cannot 0161 929 3500 be taxed as part of the company’s trading income, nor news&views@chartwellfs.com do they form part of the company’s assets. www.chartwellfs.com• The trust is discretionary, allowing trustees to be flexible in who they pay benefits to. However the employee can advise the trustees of his or her intentions by completing a nomination form. Although this is not legally binding on the trustees, it helps to guide them. The trustees will normally be the directors of the company.• Using a trust also ensures that in most circumstances benefits are paid free of both income tax and inheritance tax.How do I take out a relevant life policy?Contact your Chartwell financial adviser who will discussthe tax advantages and suitability with you in more depthand arrange for the appropriate documentation to becompleted.Chartwell Financial Services is authorised and regulated by the Financial Services Authority, registration number 189602. Registered Office: Lindley Court, Scott Drive, Altrincham,Cheshire WA14 4RP.PC1862C.0811