Reply to: Relevant Life Policy?

[keymanadvice]

Tax Efficient Life Cover for Directors

Most of the information above is correct - if you are a salaried employee even if it is your company, you are entiltled to put this type of tax efficient Life & Terminal Illness cover in place via you Ltd Company. Sums assured up to £1m are not usually subject to financial undewriting to check if you are over insured, but the amount of cover allowed is usually based on a multiple of total renumeration which can include dividends.

Bottom line is that you are not paying for your personal cover out of income you have allready been taxed on and benefits are paid tax free via a trust to your dependents etc.

[MarillionFan]

As an IFA I have helped many company directors save with these tax efficient life policies. Bright Grey started these plans followed by Zurich Scottish Provident and now Pru Protect. Although the policy is owned by the company the policy is set up in a trust so that if a claim is made the proceeds are paid to the policyholders beneficiaries.

Although some clients have been small companies with 5 or so employees that were too small for death in service group life schemes, the majority of plans that I have done have been for small limited companies where the company directors have been husband and wife.

I there is a simple relevant life savings calculator that can show you how much you could save at ......

MOD NOTE:

Hi needingadvice, you're not really are you? You're actually givingadvice. Please read the T&Cs for the CUK forums. You'll find that blatant advertising is not allowed. You are allowed to promote you and your company while giving advise with the login of your company - givingadvice@quotes4life. Ask Admin who will do this for you.

To be fair though, this is quite an interesting thread and one benefit I am not aware of and was looking at.

[needingadvice]

As an IFA I have helped many company directors save with these tax efficient life policies. Bright Grey started these plans followed by Zurich Scottish Provident and now Pru Protect. Although the policy is owned by the company the policy is set up in a trust so that if a claim is made the proceeds are paid to the policyholders beneficiaries.

Although some clients have been small companies with 5 or so employees that were too small for death in service group life schemes, the majority of plans that I have done have been for small limited companies where the company directors have been husband and wife.

I there is a simple relevant life savings calculator that can show you how much you could save at ......

MOD NOTE:

Hi needingadvice, you're not really are you? You're actually givingadvice. Please read the T&Cs for the CUK forums. You'll find that blatant advertising is not allowed. You are allowed to promote you and your company while giving advise with the login of your company - givingadvice@quotes4life. Ask Admin who will do this for you.

[SueEllen]

Yes, though the key words in that might be "in lieu". Though its probably not a problem I'd like to be very sure exactly what that meant and what the implications might be in terms of possible IR35/S660 issues.

As we aren't financial/tax advisers wouldn't be a good idea to find one and ask the question?

I don't think this board has a resident financial/tax adviser.

[ASB]

The answer is in the post you quoted.

Yes, though the key words in that might be "in lieu". Though its probably not a problem I'd like to be very sure exactly what that meant and what the implications might be in terms of possible IR35/S660 issues.

[mudskipper]

My brother is a financial planning manager at Natwest and he sent me this through a couple of days ago:

Relevant Life Policies

What are they?
a stand alone single life policy to provide death in service benefits similar to a group life scheme but for one member eg for a small company
unlike most large employer provided schemes they are 'non–registered' so do not fall under pensions legislation

What do they do?
RLPs provide life cover for the benefit of employees and directors' dependants paid through a discretionary trust
provide life cover in a tax efficient way, compared to employees paying for benefits personally from their net income
they are taken out on the life of an employee and paid for by the employer

Who is allowed to have one?
an employee of a business, including directors, the business can be a limited company
'salaried' partners who are taxed as schedule E can be covered

What is the target market?
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

Why are they tax efficient?

Premiums
premiums paid by the employer are not treated as a P11D benefit and are not taxed back on the employee
for a higher rate taxpayer in a small company this can reduce costs by up to a third
there are no National Insurance implications on either the employee or the employer
subject to the company's accountant/local tax inspector they may be treated as a business expense (allowable deduction)
premiums do not count as part of the annual pension allowance for tax purposes
Benefits
benefits are payable free of income tax
benefits are normally free of inheritance tax
unlike lump sums paid under a registered scheme, RLP benefits do not form part of the employee’s lifetime allowance for pensions

Are there any restrictions?
it must provide life cover only (including terminal illness) no critical illness benefits are allowed
the term cannot exceed the 75th birthday of the employee
no surrender value is allowed
benefits must be payable via a discretionary trust
it must not be set up for tax avoidance purposes

How much cover can be provided?
for cases where the sum assured is greater than £1m
20 x remuneration for employees aged below 40
15 x remuneration for employees aged 40-59
10 x remuneration for employees aged above 60
remuneration can include salary, bonus, and dividends paid in lieu of salary plus any taxable benefit in kind

How to apply
Level Protection Plan (LPP) application completed by employee
Life of Another form with the employer as the policy owner (Company, Partnership, Sole trader) and employee as Life Assured
RLP Trust Deed
RLP Nomination Form completed by employee to be held by trustees
submit the trust before the plan issues, the Life policy cannot go on risk before the trust is effected
tick the box in the life assured section on the application form; is the life assured also the plan owner, no
tick the box in the adviser section on the application form that the policy is to be in trust

Remuneration? Salary only or dividends?

Otherwise a low salary could restrict the max cover a bit....

The answer is in the post you quoted.

[Jonny1974]

Remuneration? Salary only or dividends?

Otherwise a low salary could restrict the max cover a bit....

Both

[northernladuk]

How come whenever NLUK posts theres always a follow-up by JamJar agreeing with him?

Are NLUK/JamJar the same person or you romantically involved or something?

Maybe we are different people but neither of us suffer fools very well.....

[JamJarST]

How come whenever NLUK posts theres always a follow-up by JamJar agreeing with him?

Are NLUK/JamJar the same person or you romantically involved or something?

Yep, it is one of those two, lol. Actually I think he is a rude plonker but, damn him, he makes sense most of the time

[psychocandy]

My brother is a financial planning manager at Natwest and he sent me this through a couple of days ago:

Relevant Life Policies

What are they?
a stand alone single life policy to provide death in service benefits similar to a group life scheme but for one member eg for a small company
unlike most large employer provided schemes they are 'non–registered' so do not fall under pensions legislation

What do they do?
RLPs provide life cover for the benefit of employees and directors' dependants paid through a discretionary trust
provide life cover in a tax efficient way, compared to employees paying for benefits personally from their net income
they are taken out on the life of an employee and paid for by the employer

Who is allowed to have one?
an employee of a business, including directors, the business can be a limited company
'salaried' partners who are taxed as schedule E can be covered

What is the target market?
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

Why are they tax efficient?

Premiums
premiums paid by the employer are not treated as a P11D benefit and are not taxed back on the employee
for a higher rate taxpayer in a small company this can reduce costs by up to a third
there are no National Insurance implications on either the employee or the employer
subject to the company's accountant/local tax inspector they may be treated as a business expense (allowable deduction)
premiums do not count as part of the annual pension allowance for tax purposes
Benefits
benefits are payable free of income tax
benefits are normally free of inheritance tax
unlike lump sums paid under a registered scheme, RLP benefits do not form part of the employee’s lifetime allowance for pensions

Are there any restrictions?
it must provide life cover only (including terminal illness) no critical illness benefits are allowed
the term cannot exceed the 75th birthday of the employee
no surrender value is allowed
benefits must be payable via a discretionary trust
it must not be set up for tax avoidance purposes

How much cover can be provided?
for cases where the sum assured is greater than £1m
20 x remuneration for employees aged below 40
15 x remuneration for employees aged 40-59
10 x remuneration for employees aged above 60
remuneration can include salary, bonus, and dividends paid in lieu of salary plus any taxable benefit in kind

How to apply
Level Protection Plan (LPP) application completed by employee
Life of Another form with the employer as the policy owner (Company, Partnership, Sole trader) and employee as Life Assured
RLP Trust Deed
RLP Nomination Form completed by employee to be held by trustees
submit the trust before the plan issues, the Life policy cannot go on risk before the trust is effected
tick the box in the life assured section on the application form; is the life assured also the plan owner, no
tick the box in the adviser section on the application form that the policy is to be in trust

Remuneration? Salary only or dividends?

Otherwise a low salary could restrict the max cover a bit....

[psychocandy]

Ooh harsh but fair

How come whenever NLUK posts theres always a follow-up by JamJar agreeing with him?

Are NLUK/JamJar the same person or you romantically involved or something?

[Jonny1974]

My brother is a financial planning manager at Natwest and he sent me this through a couple of days ago:

Relevant Life Policies

What are they?
a stand alone single life policy to provide death in service benefits similar to a group life scheme but for one member eg for a small company
unlike most large employer provided schemes they are 'non–registered' so do not fall under pensions legislation

What do they do?
RLPs provide life cover for the benefit of employees and directors' dependants paid through a discretionary trust
provide life cover in a tax efficient way, compared to employees paying for benefits personally from their net income
they are taken out on the life of an employee and paid for by the employer

Who is allowed to have one?
an employee of a business, including directors, the business can be a limited company
'salaried' partners who are taxed as schedule E can be covered

What is the target market?
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

Why are they tax efficient?

Premiums
premiums paid by the employer are not treated as a P11D benefit and are not taxed back on the employee
for a higher rate taxpayer in a small company this can reduce costs by up to a third
there are no National Insurance implications on either the employee or the employer
subject to the company's accountant/local tax inspector they may be treated as a business expense (allowable deduction)
premiums do not count as part of the annual pension allowance for tax purposes
Benefits
benefits are payable free of income tax
benefits are normally free of inheritance tax
unlike lump sums paid under a registered scheme, RLP benefits do not form part of the employee’s lifetime allowance for pensions

Are there any restrictions?
it must provide life cover only (including terminal illness) no critical illness benefits are allowed
the term cannot exceed the 75th birthday of the employee
no surrender value is allowed
benefits must be payable via a discretionary trust
it must not be set up for tax avoidance purposes

How much cover can be provided?
for cases where the sum assured is greater than £1m
20 x remuneration for employees aged below 40
15 x remuneration for employees aged 40-59
10 x remuneration for employees aged above 60
remuneration can include salary, bonus, and dividends paid in lieu of salary plus any taxable benefit in kind

How to apply
Level Protection Plan (LPP) application completed by employee
Life of Another form with the employer as the policy owner (Company, Partnership, Sole trader) and employee as Life Assured
RLP Trust Deed
RLP Nomination Form completed by employee to be held by trustees
submit the trust before the plan issues, the Life policy cannot go on risk before the trust is effected
tick the box in the life assured section on the application form; is the life assured also the plan owner, no
tick the box in the adviser section on the application form that the policy is to be in trust

[ASB]

Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.

And without research probably come up with the wrong answer

You could infer from Gregs reply that benefit was payable to the director and premiums payable by the company but not a BIK. It goes further than that however.

- Tax deductible for the employer not assessable on the Employee
- Not assessable to income tax when paid to director (or estate)
- Not assessable to IHT when paid to the estate of the director
- Can usually be paid on diagnosis of terminal illness.

If the overall rates are similar to traditional life policies then it is a good deal tax wise.

However a caution would be that if term assurance is bought and the company is subsequently wound-up then the individual may require to acquire the same or similar cover. When older the rates etc could be more difficult to manage. This sort of policy is not expected to provide cover after an employee leaves employment.

fwiw my employer provides these foc for employees, provided they opt in.

Link:

https://www.pruprotect.co.uk/pdfs/li...ient_guide.pdf
https://www.pruprotect.co.uk/pdfs/li...iser_guide.pdf

[JamJarST]

Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.

Ooh harsh but fair

[northernladuk]

Interesting.....

Would any payout be paid into the company (and possibly liable to CT) or to the Directors named recipient?

Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.