Paying PHI and life cover through company

[Notascooby]

I've got both (through contractor financials) via Unum and the Pru

Life via the pru is about £45 per month and Illness protection based on 40k per year and 6 months before claim is £54 so £100 per month all in. Peace of mind when you've a wife + kids + mortgage.

illness protection is also inflation linked and based upon ability to perform current role - i.e. would pay out if still able to work but not as powerpoint jocky - I mean architect.

[psychocandy]

Possibly what is deemed as a Keyman Life Policy, I used to work at HSBC in securities (assets) and we used to have companies use these as insurance for loans etc. The way they are written suggests that the company would be up the creek without this person or persons should an accident or death befall them.

Aye. Which is most of us I guess running a one man limited co. If we dropped dead then company would, in effect, be FCUKed.

[psychocandy]

You sure about that, these comments from Mal, Craig et all all seem to think otherwise?

'This is correct, in order to ensure that the policy is not treated as a BIK it will need to be a Relevant Life Policy. '

Yes. Sorry - as you say its not a normal life policies...

Although to be fair, the quote I got from contractor financials for this type of policy even worked out cheaper than the one I'm paying for personally at the moment.

[northernladuk]

Life insurance seems to be a no brainer to be honest. Get the company to pay - 20% saved. No BIK implications and no hassle if it pays out.

You sure about that, these comments from Mal, Craig et all all seem to think otherwise?

'This is correct, in order to ensure that the policy is not treated as a BIK it will need to be a Relevant Life Policy. '

[Craig at Nixon Williams]

The company CAN pay Life Cover tax free and the payment is paid out to your beneficiary tax free as well. For the company to be able to pay it without causing a BiK it needs to be what is known as a "Relevant Life Policy". Only a few insurers provide them: Bright Grey, Scottish Provident are two that spring to mind but there are others.

This is correct, in order to ensure that the policy is not treated as a BIK it will need to be a Relevant Life Policy. In addition to this type of policy being free of BIK, in the event that the policy is used (you die) the proceeds from the policy fall outside the taxable estate for inheritance tax purposes.

Hope you find this useful!

Craig

[The Spartan]

The company CAN pay Life Cover tax free and the payment is paid out to your beneficiary tax free as well. For the company to be able to pay it without causing a BiK it needs to be what is known as a "Relevant Life Policy". Only a few insurers provide them: Bright Grey, Scottish Provident are two that spring to mind but there are others.

Possibly what is deemed as a Keyman Life Policy, I used to work at HSBC in securities (assets) and we used to have companies use these as insurance for loans etc. The way they are written suggests that the company would be up the creek without this person or persons should an accident or death befall them.

[psychocandy]

Dunno the answers to your question but when I asked my accountant he cut me dead and said just do it personally. Don't bother doing it through the company, it wasn't worth it, so never got to this level of detail.

Life insurance seems to be a no brainer to be honest. Get the company to pay - 20% saved. No BIK implications and no hassle if it pays out.

PHI, as I said, seems a bit hassle.

[northernladuk]

Dunno the answers to your question but when I asked my accountant he cut me dead and said just do it personally. Don't bother doing it through the company, it wasn't worth it, so never got to this level of detail.

[psychocandy]

The company CAN pay Life Cover tax free and the payment is paid out to your beneficiary tax free as well. For the company to be able to pay it without causing a BiK it needs to be what is known as a "Relevant Life Policy". Only a few insurers provide them: Bright Grey, Scottish Provident are two that spring to mind but there are others.

Yes, apparently. But not PHI which gets paid back to company...

[Alan @ BroomeAffinity]

The company CAN pay Life Cover tax free and the payment is paid out to your beneficiary tax free as well. For the company to be able to pay it without causing a BiK it needs to be what is known as a "Relevant Life Policy". Only a few insurers provide them: Bright Grey, Scottish Provident are two that spring to mind but there are others.

[psychocandy]

How does the company get money from PHI?

If you pay the premiums personally, you get the money tax free if you claim.

If your ltd company pays the premiums, any payments get paid into the company account. Like I said, this would appear to complicate things because there's the issue of getting it to you.

Admitedly, if, say, it was £1000/month payable, then in theory it could be used to fund continuing salary of £624, leaving a profit of £376 which would accrue CT of £75 so not much. (as opposed to £1000 which would go straight to you).

BUT, as I said, if you can't work through illness, you can claim benefits AND get this £1000 payment if paid personally. If the payment is going to ltd company who then continue to pay you I can't see they would pay any benefits.

Although, thinking about it, could ltd company get SSP off the government on your behalf?

[northernladuk]

How does the company get money from PHI?

[malvolio]

Look up two things - Key Person's Insurance and BIK.

HTH

[psychocandy]

Apparently, you can do this - thus saving CT on the premiums.

Life cover I can understand. If you pop off, then apparently, even though the company has paid for it, in essence, your dependents still get it.

PHI for illness I don;t see the advantage so much. OK, so you save 20% on the premiums but if your ill and claim the money goes to the company not you.

Now casting my mind back to when I claimed for such when I was a permie (although it was for unemployment). I'm sure you got the money tax free PLUS could claim JSA.

Now, OK, same things happen as a contractor. Your ill, can't work, claim on the policy and then company gets the money. Surely then company has to distribute it to you as continued salary or divi?

In the eyes of the Jobcentre people, your still getting an income from your ltd company thus disallowing any types of benefit surely? (even though company has claimed on policy not you).

Now before we start up that old chestnut again - I still reckon if you were seriously ill/had an accident which meant 6 months or so away from contracting you could claim benefits. If your company was still paying you salary or dividends then no way.