BIK - Any benefits vs personal expenditure?

[ladymuck]

Regarding the insurance side of things, I remember when I was getting advice from my IFA about this and pensions, etc, he said I should pay the premium personally but his fee for giving the advice was an allowable expense. He even had a chat with my accountant about it who was happy to put it through.

I took out an income replacement policy because that's the right thing for me - I don't need money when I'm dead.

A lot of companies do offer perks like insurances, gym membership, etc etc but they are all subject to BIK. I remember when I used to work in an accounts dept, working out the values that needed to go onto the P11Ds. Tedious work that was.

[WTFH]

If you're trying to reduce outgoings (not just "save tax"), cancel the gym membership and rehome a dog.

[fiisch]

Thanks all - that's good to know, I feared as much! As I say, I'd been brainstorming ideas as I fear having to dip into higher dividend tax which will hurt my warchest/not be especially efficient, but rising costs might leave me no option.

This. It's not hard. There is a very simple term that Mal mentions that covers 99% of it. For example ' I attend with my family a gym'. Wholly and exclusive? No. Done.
Life insurance is the same. It's you personally, not the job. Just apply to basic rules first and you'll have your answers..

I understood 'wholly and exclusive' to refer to goods - e.g.: a phone, laptop etc. I wondered with benefits like gym membership that sometimes employers offered this as a perk, and wondered whether there was a route to doing something similar.... evidently not.

Why not? It's what you pay them for and you get proper advice. You might actually learn something. We are giving you a fish here, a bit of time with your accountant and you might learn how to fish. You are legally responsible for your tax affairs so some basic understand would go a long way.

I'd question why your accountant isn't doing a quarterly review and bringing these proactively to you if you've already been paying life insurance for a period though.

My accountant does do quarterly reviews, but of the business accounts. They don't trawl through my personal expenditure and say "hey Fiisch, why you paying for this out of your personal accounts ya wally?". They're aware of the life insurance and have mentioned I will pay BIK on this, but I wasn't clear on whether there'd be a benefit to this (i.e.: if BIK would be at a lower rate vs dividend tax).

I do have more than a basic understanding - there are shades of grey and sometimes it's useful to engage the wisdom on CUK to help with understanding.

Case in point - question to my accountant: "if I employ my wife, is there a limit to how much I can pay into her SIPP?" - "£60k"

CUK: "Don't take the Michael. Commensurate SIPP payment for work they are doing."

Two very different answers, and as a risk adverse person if I was to employ my wife in future I'd prefer to go with the latter. Technically and by the letter of the law, I'm sure my accountant isn't wrong, but asking CUK gave me a fuller understanding.

[northernladuk]

OP is not trying to escape a BIK charge, read the OP - you and nluk love answering the question you want to answer rather than the question that's actually asked

He's getting the quality of response that he's paying for to be fair.

But if there were any benefits we'd generally all know and it would be standard practice. Anything hooky, grey or super clever then he needs to be speaking to a professional.

[malvolio]

OP is not trying to escape a BIK charge, read the OP - you and nluk love answering the question you want to answer rather than the question that's actually asked

They want to know if there is any plausible advantage to paying for something through the company and paying the BIK, vs paying personally

One example might be if you can get a "business only" deal / contract for something which you don't use wholly and exclusively for business use, but works out cheaper than signing up for it as a "personal" customer even after considering the BIK - but purely tax wise I think it will always work out the same (with the obvious addition of paperwork if you go the BIK route). You could ask your extravagant gym if they offer company/corporate membership for a discount but I wouldn't get your hopes up.

There has also been a lot of discussion about electric company cars and the relative tax advantages of putting those through a company with BIK vs personal - I don't know where that's up to in 2024 with the changing rates on things though - but if you "fiscal drag has hit us hard" then now probably isn't the time to look into buying a new car

I did read the OP and I did understand the question. The answer remains "no" if only because the BIK is still due personally and the cost will be in the same ball park. Of course you might find a difference price between a personal life assurance policy and a commercial one through the business in which case do the sums.

Nevertheless, all I was saying was make sure you are comparing apples with apples and not aardvarks.

[pr1]

OK, but how does that escape a BIK charge, since clearly it is not a business expense...? Also remembering that a director is not an employee, if that has any impact.

OP is not trying to escape a BIK charge, read the OP - you and nluk love answering the question you want to answer rather than the question that's actually asked

They want to know if there is any plausible advantage to paying for something through the company and paying the BIK, vs paying personally

One example might be if you can get a "business only" deal / contract for something which you don't use wholly and exclusively for business use, but works out cheaper than signing up for it as a "personal" customer even after considering the BIK - but purely tax wise I think it will always work out the same (with the obvious addition of paperwork if you go the BIK route). You could ask your extravagant gym if they offer company/corporate membership for a discount but I wouldn't get your hopes up.

There has also been a lot of discussion about electric company cars and the relative tax advantages of putting those through a company with BIK vs personal - I don't know where that's up to in 2024 with the changing rates on things though - but if you "fiscal drag has hit us hard" then now probably isn't the time to look into buying a new car

[northernladuk]

OK, but how does that escape a BIK charge, since clearly it is not a business expense...? Also remembering that a director is not an employee, if that has any impact.

It's well documented that relevant life policies that are held by the company are tax deductable.

https://www.contracteye.co.uk/releva...nt-cover.shtml

https://www.legalandgeneral.com/insu...tax-treatment/

There used to be a chap on here that offer CUK discounts. WPA was it? I forget.

[malvolio]

It's not key person life cover. It's a relevant life cover, and it works exactly the same way as normal life cover in that your chosen beneficiary will get a pay out if you die. If you work through your own Ltd company and don't put life cover through your company (set up the right way) you are wasting money. These guys give some more detail (note I used someone different to setup my life cover they are just the first result that came up in a Google search so this link is not a recommendation from me to use them) https://www.drewberryinsurance.co.uk...ant-life-cover

OK, but how does that escape a BIK charge, since clearly it is not a business expense...? Also remembering that a director is not an employee, if that has any impact.

[davetza]

Also worth noting that the "Key Person" life cover is not directly comparable to life insurance, in that it is protecting the company from the loss of a key worker, not the life of a named individual. It may be a difference without distinction, but it would be as well to check that both do the same thing. For one (probably spurious1) thought, if you dying means the company is closed, will the the Key Person cover have to pay out anything, since its insuree is no longer there...?

It's not key person life cover. It's a relevant life cover, and it works exactly the same way as normal life cover in that your chosen beneficiary will get a pay out if you die. If you work through your own Ltd company and don't put life cover through your company (set up the right way) you are wasting money. These guys give some more detail (note I used someone different to setup my life cover they are just the first result that came up in a Google search so this link is not a recommendation from me to use them) https://www.drewberryinsurance.co.uk...ant-life-cover

[malvolio]

Also worth noting that the "Key Person" life cover is not directly comparable to life insurance, in that it is protecting the company from the loss of a key worker, not the life of a named individual. It may be a difference without distinction, but it would be as well to check that both do the same thing. For one (probably spurious1) thought, if you dying means the company is closed, will the the Key Person cover have to pay out anything, since its insuree is no longer there...?

[northernladuk]

Quick answer? No to both...

Basically both fail the "wholly and exclusively" test. As your accountant says, doesn't matter who pays for it, the tax liability is yours personally.

This. It's not hard. There is a very simple term that Mal mentions that covers 99% of it. For example ' I attend with my family a gym'. Wholly and exclusive? No. Done.
Life insurance is the same. Its you personally, not the job. Just apply to basic rules first and you'll have your answers..

At the risk of being lambasted for not bothering my lovely accountant with this nonsense,

Why not? It's what you pay them for and you get proper advice. You might actually learn something. We are giving you a fish here, a bit of time with your accountant and you might learn how to fish. You are legally responsible for your tax affairs so some basic understand would go a long way.

I'd question why your accountant isn't doing a quarterly review and bringing these proactively to you if you've already been paying life insurance for a period though.

[davetza]

You can put life insurance through your company and not pay BIK, but it needs to be a certain type of life cover. Just Google "Relevant Life Insurance and Ltd company".

[malvolio]

Quick answer? No to both...

Basically both fail the "wholly and exclusively" test. As your accountant says, doesn't matter who pays for it, the tax liability is yours personally.

[fiisch]

At the risk of being lambasted for not bothering my lovely accountant with this nonsense, and being too dense to fully comprehend the hieroglyphics on HMRC's site, I thought I'd engage the collective wisdom of CUK. ...

I understand BIK is chargeable on expenses put through the business that are construed as also having a personal benefit e.g.: an ICE company car, and that it is charged at your marginal tax rate i.e.: if you're a lower rate tax payer, you'll pay BIK at the same rate.

Are there certain situations where it's beneficial to put an expense through the ltd co rather than fund it personally and pay the BIK?

The specific example(s) I am considering is that I will likely reach the upper limit of the lower dividend tax this year, and there are two "expenses" which are very much personal but I believe could go via the business:

1). Life insurance - I actually already put this through the business (I assumed this was an allowable expense), and my accountant suggested to leave as-is and simply pay the BIK

2). Gym membership - I attend with my family a gym which costs around £450/month (yes, very extravagant, but it's been brilliant for mental/physical wellbeing).

I suspect the answer is no, but is there any benefit in putting these via the ltd co and accepting the BIK charge vs personally funded? Presumably, there's no corp tax savings and the cash equivalent is added to your dividends so you pay the same amount of tax regardless, but I'm brainstorming how to be as tax efficient as possible - fiscal drag has hit us hard and we have a big mortgage increase later in the year. I don't want to let the tax tail wag the dog, but equally I don't want to pay crazy amounts of tax at the expense of my reserve fund simply to keep pace with our expenses.