Private health insurance through limited company?

[alpe19]

Hello Everyone,

I am considering getting private medical insurance for myself and my partner (with whom I co-own our ltd company) and I understand that I have two options: get it through our limited company or pay for it personally. I have read a couple of blog posts on this website (here and here) and searched on google but could not find anything about what I would like to do.

Both my partner and I are full-time employees and we have our limited company as a side activity. We are comfortable with our salaries as employees so we don't get a salary from our limited company (i.e. we are not registered for PAYE).

Now, if I were to get private health insurance as a small business, the premium would be approximately half compared to getting the same cover personally. Nonetheless, if the company paid the premium, it would be a benefit in kind, the company should pay 13.8% NI, we should register for PAYE and get a P11D (i.e. additional accountancy fees) and we should pay income tax, which would make the overall cost higher than taking out the insurance personally.

What I would like to do comes from this (paragraph "What happens if your employees contribute to the cost of their private medical insurance plan?"), where it looks like any employee contribution to the cost would be deducted from the P11D. Would it be possible to take out the policy as a small business, have the company pay the premium to the insurance, but have the directors contribute 100% of the cost? In this scenario, the company would end up paying nothing: does it mean that we would be exempt from registering for PAYE and get a P11D? Also, would there be any NI and/or tax liability arising?

My hope is that, in the scenario above, we would be able to take advantage of the better premium of the small business insurance, without any of the additional costs. What are your thoughts?

Thank you very much!

[malvolio]

A couple of thoughts …

You would find it difficult to pass the "Wholly and exclusively" rule (especially when you are employees of another company).

YourCo is not there to provide discounts on taxation, despite what many believe.

Perhaps you should ignore the taxation aspect and use YourCo dividends to cover the annual cost? Unless it doesn't have enough income in which case all bets are off anyway...

[ladymuck]

[NLUK mode] Have you asked your accountant / chatGPT [/NLUK mode]

[alpe19]

Hi,

Thank you both for your input.

I understand that what I am suggesting is not conventional, but if that allows me to save almost £1000 per year without doing anything, why not?
Also, I asked my accountant but I don't think they understood my question as they said that any contribution from the directors towards the insurance premium would be irrelevant, while the document I linked in the first post clearly states the opposite. Before getting back to them, I wanted to be sure that I understood things well enough and that's why I came here.

Asking ChatGPT was a great suggestion, thank you. I got this response:

Since both directors are contributing 100% of their respective premiums, and the company is not paying anything towards the premiums, there would be no benefit in kind (BIK) for the directors, and therefore no income tax or national insurance liabilities for the company or the directors in this scenario.

The fact that the company pays the premiums to the insurance company but is reimbursed by the directors does not change the tax treatment. As long as the directors are paying the full cost of their premiums, there is no BIK arising for them.

It is worth noting that if the directors were only contributing a portion of their premiums, the part paid by the company would be considered a BIK and subject to income tax and national insurance. However, in this specific case, the directors are contributing 100% of their premiums and the company is not paying any part of the premiums, so there is no tax or national insurance liability.

I then asked if a P11D should be filled in by the company:

If there is no BIK to report for the directors, then the company is not required to fill in a P11D form for them.

However, it's important to note that if the company is registered for PAYE (Pay As You Earn), they still need to submit a P11D(b) form to HMRC, even if there are no BIKs to report. The P11D(b) form reports to HMRC the amount of Class 1A national insurance contributions due on any BIKs provided to employees or directors during the tax year.

So, in summary, if there are no BIKs to report, the company does not need to fill in a P11D form for the directors, but they will still need to complete a P11D(b) form if they are registered for PAYE.

Lastly, I asked if the directors should be registered for PAYE by the ltd company, since they are not paid a salary and, therefore, they are currently not registered:

If the directors are not paid a salary by the company and they have no other taxable income, they may not need to be registered for PAYE.

However, it's important to note that directors who receive a salary, including any benefits or expenses, or those who receive income from other sources that require them to complete a tax return, may need to register for self-assessment with HMRC.

In addition, even if the directors are not receiving a salary, if they are being paid dividends by the company, the company will need to operate PAYE and National Insurance on any salary payments, including any bonuses or benefits in kind.

It is recommended that the company seeks professional advice to ensure that they are complying with their tax and national insurance obligations, and that the directors are meeting their own tax obligations.

I know the answers from ChatGPT may be inaccurate, but it seems to suggest that what I would like to do may be possible. I will have to check again with the accountant and see what they say.

Thanks again!

[hobnob]

Now, if I were to get private health insurance as a small business, the premium would be approximately half compared to getting the same cover personally.

I might be missing something here, but I don't quite understand what you're trying to do.

If you pay 100% of the cost yourself (from your net income) then it has nothing to do with the company. Why is the premium going to be half the cost? Is this a discount from the insurance company (business rates) or does that saving assume that the company is paying for it?

[alpe19]

Honestly, I don't know why that's the case, but if I get a quote from Vitality as a small business and then a quote for the exact same coverage as a private individual, the premium quoted as a small business is exactly half. When I spoke with the second advisor at Vitality, they confirmed that their prices for small businesses are much lower, though they were unable to say why.

What I am trying to do, if it's allowed, is to get the price quoted to small businesses but pay it myself by refunding my ltd company in order to avoid NI, income tax and accountant fees.

[northernladuk]

Hi,

Thank you both for your input.

I understand that what I am suggesting is not conventional, but if that allows me to save almost £1000 per year without doing anything, why not?

Did you read Malvio's point?

Also, I asked my accountant but I don't think they understood my question as they said that any contribution from the directors towards the insurance premium would be irrelevant, while the document I linked in the first post clearly states the opposite. Before getting back to them, I wanted to be sure that I understood things well enough and that's why I came here.

Asking ChatGPT was a great suggestion, thank you. I got this response:

Since both directors are contributing 100% of their respective premiums, and the company is not paying anything towards the premiums, there would be no benefit in kind (BIK) for the directors, and therefore no income tax or national insurance liabilities for the company or the directors in this scenario.

The fact that the company pays the premiums to the insurance company but is reimbursed by the directors does not change the tax treatment. As long as the directors are paying the full cost of their premiums, there is no BIK arising for them.

It is worth noting that if the directors were only contributing a portion of their premiums, the part paid by the company would be considered a BIK and subject to income tax and national insurance. However, in this specific case, the directors are contributing 100% of their premiums and the company is not paying any part of the premiums, so there is no tax or national insurance liability.

I then asked if a P11D should be filled in by the company:

If there is no BIK to report for the directors, then the company is not required to fill in a P11D form for them.

However, it's important to note that if the company is registered for PAYE (Pay As You Earn), they still need to submit a P11D(b) form to HMRC, even if there are no BIKs to report. The P11D(b) form reports to HMRC the amount of Class 1A national insurance contributions due on any BIKs provided to employees or directors during the tax year.

So, in summary, if there are no BIKs to report, the company does not need to fill in a P11D form for the directors, but they will still need to complete a P11D(b) form if they are registered for PAYE.

Lastly, I asked if the directors should be registered for PAYE by the ltd company, since they are not paid a salary and, therefore, they are currently not registered:

If the directors are not paid a salary by the company and they have no other taxable income, they may not need to be registered for PAYE.

However, it's important to note that directors who receive a salary, including any benefits or expenses, or those who receive income from other sources that require them to complete a tax return, may need to register for self-assessment with HMRC.

In addition, even if the directors are not receiving a salary, if they are being paid dividends by the company, the company will need to operate PAYE and National Insurance on any salary payments, including any bonuses or benefits in kind.

It is recommended that the company seeks professional advice to ensure that they are complying with their tax and national insurance obligations, and that the directors are meeting their own tax obligations.

I know the answers from ChatGPT may be inaccurate, but it seems to suggest that what I would like to do may be possible. I will have to check again with the accountant and see what they say.

Thanks again!

I think you forgot to mention to Chat that you are fully employed as well and this is a side activity which comes back around to Malvios point yet again. This is your side hussle so using the LTD for this when you are in full time employment isn't going to work and as he points out you are trying to use your side hussle for tax breaks as if it were your full time work like most of us.

Another example. Would your LTD be paying for your desk and chairs when you'll be sat in them doing your full time job? Also fails wholly and exclusively test.

[alpe19]

Yes, I agree with you and I think I get the point.

My understanding is that an expense meeting the "wholly and exclusively" criterion would be an allowable expense and, therefore, could be paid by the company without any BIK arising from it while, if the criterion was not met, any payment made by the company for the benefit of the employees would be treated as a BIK, incurring class 1A NI (for the company) and income tax (for the employees).

What I would be proposing to do assumes that the "wholly and exclusively" condition is not met, but would try to avoid the additional NI and tax liabilities by making the employees contribute 100% of the cost back to the company.

I will try to get in touch with HMRC and ask them if what I am trying to do makes any sense or not.

Thanks again for the input so far!

[malvolio]

Yes, I agree with you and I think I get the point.

My understanding is that an expense meeting the "wholly and exclusively" criterion would be an allowable expense and, therefore, could be paid by the company without any BIK arising from it while, if the criterion was not met, any payment made by the company for the benefit of the employees would be treated as a BIK, incurring class 1A NI (for the company) and income tax (for the employees).

What I would be proposing to do assumes that the "wholly and exclusively" condition is not met, but would try to avoid the additional NI and tax liabilities by making the employees contribute 100% of the cost back to the company.

I will try to get in touch with HMRC and ask them if what I am trying to do makes any sense or not.

Thanks again for the input so far!

You miss the point - well, three points in fact.

1. You fail the wholly and exclusively test on several issues, not least of which that the company is not your employer. You are officers of the company, not employees.

2. You are compensating YourCo with taxed earned income. So I fail to see where the saving arises if you add up all the numbers that actually apply.

3. Your answer to 2 above is that you get a lower premium as a company director. Except that fails on 1 above and you are in fact committing fraud, if not outright evasion. It's no different to the EBT schemes, where you are applying a set of rules to a position that you do not actually qualify for.

HMRC will look at the totality of the situation. As I said originally, YourCo is not there to avoid you paying taxes or save you personal income. But hey, your money, your life, your court case.

[pr1]

It appears OP just wants to make savings of the health insurance company offering a better rate to a company than an individual for essentially the same cover, akin to using the fact OP has a business being able to get a trade membership costco card

If it were me (I'm not an accountant or lawyer) I would sign up via the company to get the saving then account for the monthly premiums as directors loan payments which I would clear/cancel out from personal money each month