11-12-2014

Business Protection

Business owners are missing out Tax savings on vital Business Protection:

It’s a given that should the worst happen we all want to ensure that our family and other dependents are looked after financially.  As such life cover is something that we urge all our mortgage customers to consider and of course there are numerous policies available all of which offer particular benefits.  If you are a small business owner you may also need to consider how your death would impact on the ability of your company to trade, and many people will take out an additional policy with their fellow directors named as beneficiaries. What many businesses are unaware of is that it’s possible to arrange business protection provision for both these parties, through their company, whilst also achieving significant tax savings.

This kind of protection comes under the banner of Relevant Life Cover. These policies were introduced in 2003 by a number of mainstream providers following a consultation with HMRC and are intended to enable businesses, whatever their size, to provide Death in Service benefits.  It differs from a group insurance policy in that it offers individual cover rather than for a group of employees.

Under a Relevant Life Cover policy beneficiaries can include both family members and the remaining directors of the business.

When it comes to payment of a benefit then Relevant Life Cover works slightly differently to standard life cover. Following the death of the assured the benefit will be paid direct to the company, with the remaining directors acting as trustees for the nominated beneficiary – so for example spouse or other family member.  The benefit can be allocated as required so a nominated percentage is paid to the family and a percentage to the remaining directors.  In the event of terminal illness the sum assured is paid to the life assured as a tax free lump sum.

There are a number of benefits that Relevant Life Cover can offer in terms of tax efficiency. Firstly premiums are paid direct by the company which means they can be offset against Corporation Tax.

Any payout will also not be liable to income tax or inheritance tax for either family members or company.  And because the benefit is paid through a Trust it cannot be taxed as part of the company’s trading income. It also doesn’t form part of its assets.  Managing your life cover in this way can provide significant savings so it’s worth taking advice on the best policy for your needs.

And as with all insurance don’t forget to review your provision regularly.  Circumstances change over time so it’s important to check that the cover you have is still relevant, and adequate.  We offer clients an annual review and will advise on any changes that we think may be needed.

Let the Taxman help pay for your Life Cover

Relevant Life

Relevant Life cover was introduced in 2003 by mainstream providers after consultation with the revenue. Relevant Life Policies are a way of providing Death-in-service benefits on an individual basis no matter how small your business in.

Key points of Relevant Life:

  • Tax Advantageous – Corporation Tax relief available
  • Limited company is responsible for paying premium
  • Benefits upon death are paid to limited company (trustees) – then possible for the Life Assured to nominate a beneficiary or beneficiaries (spouse or family members) Benefit can be split i.e. 50 % spouse 50% Limited Company)
  • Terminal Illness – in the event of diagnosis of terminal illness the sum assured is paid to the life assured – tax free
  • No Liability to Income Tax or Inheritance Tax for either nominated beneficiaries or nominated company
  • Trustees of the contract are the other Directors
  • Benefits paid through a Trust makes sure they cannot be taxed as part of the Company’s trading income nor does it form part of the Company’s assets
  • Premiums may be payable annually or monthly

Post Sales Service

Not only do we provide advice with state of the art research material but once a protection policy is implemented, we provide annual reviews of your account to ensure that you are still adequately covered in line with changes in your circumstances.

Furthermore, the level of service we provide goes beyond an annual review. We also provide full assistance in the event of a claim including dealing with not only you as a client but the GP surgery, medical team and the claims assessors at the insurance company.

We feel it’s our duty and responsibility to make sure our clients receive their benefits in the event of a valid claim.

CI Expert Critical Illness Knowledge Base

CIExpert is an award winning independent organisation that creates in depth analysis to assist advisers in choosing the best policy for their clients. They seek to provide guidance and education to consumers in understanding the value and choice of Critical Illness Insurance and pride themselves on maintaining an objective view.

The research aims to resolve the lack of information concerning claim potential.

It seeks to highlight the conditions that may be included within a critical illness plan, what they actually are, the statistical incidence figures, and the variations between competing insurers.

Providers are compared in depth based on the likelihood of their plans paying out.

The research is constantly updated as changes in policies occur on a frequent basis.

How CI Expert benefits the Advisor & Client

With the use of CIExpert, we are able to research clients’ existing protection contracts and provide independent and informed clarification regarding existing policies.

E.g. Client has a policy with provider A. This information is compared against three of the leading market providers of today. CIExpert will draw direct comparisons between the existing policies with Provider A against the three other providers to conclude which provider is able to offer the most comprehensive Critical Illness product.

Having access to this platform ensures that as advisors are able to provide the best advice with confidence due to reliable research and clients can be satisfied that they have the best Critical Illness cover available to them in line with the budget they have set aside for protection cover and their current circumstances.

We have found on numerous occasions where a client feels they have adequate and highly specified protection when compared against other insurance providers when utilising the Expert report we have found that clients have benefited with either an amendment to the existing contract or implementation of a superior contract.

Contact the Fox Davidson mortgage protection team to find out more about Business Protection – Call 01179 897 950.