Income protection - BIK ???

[malvolio]

Asking if a BIK arises or not if YourCo pays for it is showing you have missed a fairly significant point. It's all about what income you are protecting, yours or YourCo's.

Protecting the company from the loss of invoiced income is clearly a CT-deductible cost. It's not a BIK, since you aren't paying anything or receiving anything.

Protecting your income is a BIK, since it benefits you personally and covers costs that are not YourCo's problem, such as your mortgage.

So sorry, but you're confusing YourCo and You. A potentially fatal mistake.

[Jase]

This gets asked quite a bit on here. Here is a search for all threads on the forums with income protection....

income protection site:forums.contractoruk.com - Google Search

Fill yer boots

Thanks, I did do the same search... Unless I'm blind there is not too much on IP insurance being a BIK in terms of debating for or aganst.

Jase.

[Jase]

What income do these policies protect? Make sure it isn't just limitied to 'salary' as if you are paying low salary/high dividends you won't be covered for much.

Every time I've looked at these sorts of policies they haven't made any financial sense on a premium to risk basis, and I'd be surprised if that had changed in the recent economic climate.

I've made sure the policy I am looking at covered dividends and salary, otherwise it would be useless. As I said, I am only interested in cover after my war chest would be depleted, hence a 26 week waiting period. Of course it is up to everyone to decide what level (if any) of insurance they want. Personally, I have seen on multiple occasions where insurance has been of benefit and provided peace of mind.

Jase.

[northernladuk]

This gets asked quite a bit on here. Here is a search for all threads on the forums with income protection....

income protection site:forums.contractoruk.com - Google Search

Fill yer boots

[minstrel]

What income do these policies protect? Make sure it isn't just limitied to 'salary' as if you are paying low salary/high dividends you won't be covered for much.

Every time I've looked at these sorts of policies they haven't made any financial sense on a premium to risk basis, and I'd be surprised if that had changed in the recent economic climate.

[Notascooby]

I've had a hunt around the forums but really cannot find enough information on this topic to make an informed decision. Having a mortgage I want to have something more than my war chest to rely on, so an Income Protection policy with a long deferred period meets that criteria. The benefit level would be sufficient to cover CT and any income tax, so ideally I would like it paid out of my company bank account (and paid into my company bank account in the event of a claim).

My accountant has stated this is a BIK, but I’m not convinced. There are specific “Executive “policies that cover up to 80% of gross income so there must be a market for such policies.

Do any other members have such a policy and do they declare a BIK?

Cheers,

Jase.

Jase I started a thread on this type of thing earlier but it's lost traction....but from reading the article, it looks as if no BIK is payable, especially if as you've suggested that it is paid from / to the company account.

I've just pinged off some details to contractor financials (there's also contractor money) and spoken with brightgrey about their relevant life policy to cover that avenue too.

[Jase]

Doesn't it depend who gets the payment from the policy? If it goes to the individual surely the policy will still be a BIK. If it goes to the company then it won't (but of course any payments to the individual will be taxable dependant upon how they are made).

I've had a hunt around the forums but really cannot find enough information on this topic to make an informed decision. Having a mortgage I want to have something more than my war chest to rely on, so an Income Protection policy with a long deferred period meets that criteria. The benefit level would be sufficient to cover CT and any income tax, so ideally I would like it paid out of my company bank account (and paid into my company bank account in the event of a claim).

My accountant has stated this is a BIK, but I’m not convinced. There are specific “Executive “policies that cover up to 80% of gross income so there must be a market for such policies.

Do any other members have such a policy and do they declare a BIK?

Cheers,

Jase.

[ASB]

If you weren't a freelance you wouldn't need them so they pass the "wholly and exclusively" test and so aren't a BIK.

Doesn't it depend who gets the payment from the policy? If it goes to the individual surely the policy will still be a BIK. If it goes to the company then it won't (but of course any payments to the individual will be taxable dependant upon how they are made).

[prozak]

The article does have this gem in it though:

"Following IR35, most contractors will no longer receive dividends, so this should no longer be a problem"

[malvolio]

Is income protection or sickness cover a benefit in kind if paid from the limited company bank account?

I was under the impression it was but after reading this, maybe not? Why wouldnt it be taxable personally?

Benefits are tax free when premiums are paid personally or taxable when paid through your company. If your company pays the premiums they are classed as a legitimate business expense and are without benefit in kind costs to you.

Guide to Income Protection Insurance for IT Contractors :: Contractor UK

If you weren't a freelance you wouldn't need them so they pass the "wholly and exclusively" test and so aren't a BIK.

[chrisl]

Is income protection or sickness cover a benefit in kind if paid from the limited company bank account?

I was under the impression it was but after reading this, maybe not? Why wouldnt it be taxable personally?

Benefits are tax free when premiums are paid personally or taxable when paid through your company. If your company pays the premiums they are classed as a legitimate business expense and are without benefit in kind costs to you.

Guide to Income Protection Insurance for IT Contractors :: Contractor UK