Who Are relevant Life Policies Suitable For?

• Small companies who have too few members for a group scheme.
• High earners who do not want their group death-in-service lump sum benefits to be amalgamated with their lifetime pension allowance.
• Employees who are looking to top up the benefits they receive from their employer's scheme.

What are the Advantages?

• The benefits won't form part of the employee's lifetime pension allowance.
• The payments made won't form part of the employee's annual allowance.
• The payments employers make aren't subject to income tax because they're not normally assessable on the employee as a benefit in kind.
• These payments can 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.
• In most cases the benefits are paid free of inheritance tax - provided they're payable through a discretionary trust.

Taxation Implications

Treatment of premiums

• Premiums paid by employers are not normally assessable on the employee as a benefit in kind and are therefore not subject to income tax.
• Premiums paid by employers are not normally assessable for employer or employee National Insurance contributions.
• The premiums may be treated as an allowable expense for the employer in calculating their tax liability provided that the local inspector of taxes is satisfied they qualify under the 'wholly and exclusively' rules.
• The premiums paid will not form part of the employee's annual allowance. The annual allowance is the amount that can be contributed by, or on behalf of, an individual to any registered pension scheme with the benefit of tax relief. The employee is therefore still able to make full use of their annual allowance to make contributions to a registered pension scheme.

Treatment of benefits

• The benefit will not form part of the employee's lifetime pension allowance.
• The benefits are paid free of income tax.
• Provided the benefits are payable through a discretionary trust, in most cases the benefits are paid free of inheritance tax as the payment is not part of the employee's estate. But the trust will be subject to normal inheritance tax rules for discretionary trusts which in some circumstances may give rise to the following charges:
  • Up to 6% of the value of the trust fund on each tenth anniversary of the date the trust was established (the periodic charge). A periodic charge will only apply if there is a value held in the trust at the tenth anniversary. This could happen, if for example, the employee dies shortly before the tenth anniversary and the benefits have not been distributed to the beneficiaries.
  • Up to 6% of the value of the fund on appointment of benefits out of the trust to a beneficiary (the exit charge).

Take Our Advice

With years of experience there's nothing we don't know about business protection, talk to us and we can give you sound advice on what type of cover is best for your business and how much. Simply call 0800 583 7288 or submit an enquiry.