Critical illness insurance/benefit in kind?

[TheMrs]

Reviewing insurances and wondering about something before IFA is back on Tuesday;

We are planning critical illness and income replacement insurance which we can either pay personally or through our ltd company. Clearly if it's paid for by our company then it will give rise to a benefit in kind tax charge but we save on corporate tax.

My question is this - If we pay through the company, in the event we need to make a claim is the benefit payable to the company or to us personally? If it is paid to the company presumably it can then only be taken out of the company as salary and taxed accordingly?

With thanks

[Lauragray86]

Hi

Income protection payouts are tax free. I believe you can specify who would receive the payout in the event of a claim.

Laura

[Power Mortgages Ltd]

My question is this - If we pay through the company, in the event we need to make a claim is the benefit payable to the company or to us personally? If it is paid to the company presumably it can then only be taken out of the company as salary and taxed accordingly?

With thanks

Hi TheMrs,

Yes, if you pay the policy through the Limited Company the benefit would be paid to the Limited Company and you would then withdraw in the form of salary and dividends and be taxed accordingly.

[mudskipper]

Hi TheMrs,

Yes, if you pay the policy through the Limited Company the benefit would be paid to the Limited Company and you would then withdraw in the form of salary and dividends and be taxed accordingly.

So if that's the case, is it still BIK?

[Craig at Nixon Williams]

If the person insured is a director or majority shareholder then the premium will not be deductible for Corporation tax purposes, see: BIM45530 - Specific deductions: insurance: key persons: non-trade purposes.

If it is a company policy (the beneficiary is the company rather than an individual), the premium would not be a benefit in kind - but if a claim is made under the policy then the proceeds would be taxable and shareholders would access it by paying dividends.

If then beneficiary was an individual associated with the company then the premium would be a BIK.

Hope this helps!
Craig

[kevpuk]

I have a Relevant Life policy, which I understood to be pretty much the only insurance that MyCo could pay and not be BIK....

I am not an IFA, mind

[Craig at Nixon Williams]

I have a Relevant Life policy, which I understood to be pretty much the only insurance that MyCo could pay and not be BIK....

I am not an IFA, mind

Relevant life policies are very tax efficient as the premiums are not treated as a BIK and should be deductible for corporation tax.

In the event that a claim is made, the proceeds would not be included in your estate for inheritance tax purposes either.

[davetza]

Would a life insurance payout through a Ltd be liable for corporation tax?

[Craig at Nixon Williams]

Would a life insurance payout through a Ltd be liable for corporation tax?

If the company is the beneficiary of the policy then yes CT would be charged on the proceeds from the policy.