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Where Taxpayers and Advisers Meet

Transfer personal insurances to Ltd Company

chocolatespatula
Posts:11
Joined:Tue Mar 02, 2021 10:00 pm
Transfer personal insurances to Ltd Company

Postby chocolatespatula » Tue Mar 02, 2021 10:33 pm

I currently have a bunch of personal insurances; life insurance, income protection and family income cover and understand that these may be tax deductible under my limited company (I will still have my PAYE job for which he income protection would be mapped against). Does anyone have any guidance on how to switch these to the company account?

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Transfer personal insurances to Ltd Company

Postby Lambs » Wed Mar 03, 2021 12:21 am

C,

These plans/policies may be allowable in your new company but basically only if they serve a business purpose for that company. If the contracts are in your name and your new company pays them for you, then it will merely be settling a pecuniary liability of yours. This will trigger NICs liability for you AND for the company as if it were paying you salary, and a taxable benefit on you for Income Tax purposes. Most would consider this tax-inefficient. If your company re-makes the contracts in your place, then the rates may well change significantly, (either good or bad, depending on the circumstances) and it will in most cases still be a taxable benefit. Although do take qualified independent financial advice on whether or not a relevant life policy may be suitable to your / your company's needs, as they can enjoy relatively favourable treatment in the right circumstances.

With regards,

Lambs

chocolatespatula
Posts:11
Joined:Tue Mar 02, 2021 10:00 pm

Re: Transfer personal insurances to Ltd Company

Postby chocolatespatula » Thu Mar 04, 2021 12:53 am

The named policy holder is understandable here, as they were only taken our 12 months ago with no health changes they would be unlikely to have moved too far in premium, but you still say it may in many cases still be a taxable benefit?

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Transfer personal insurances to Ltd Company

Postby Lambs » Thu Mar 04, 2021 1:20 am

C,

I fear you assume too much in relation to how companies approach premia for policies taken out by individuals as averse to corporate schemes. I also fear you misunderstand the point as regards contracts that are not in the employer's name. They are taxable benefits AND they are subject to NICs broadly as if they were salary. Even if they were re-cast in the name of the employer, they would typically then remain taxable benefits, although there are some exceptions. Note HMRC also has quite a difficult approach to certain policies that they deem to be capital in nature, such as where they cover the cost of shares (although this may not be an issue for a singleton company). Again, I would recommend you take independent financial advice from a suitably qualified professional, to ensure that the policies adopted by the company are suitable.

Regards,

Lambs

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Transfer personal insurances to Ltd Company

Postby robbob » Thu Mar 04, 2021 9:41 am

There is a very common sales technique (scam) here for life insurance companies and medical benefit sellers and gym companies selling membership to their gyms - they will all correctly say you can get a tax deduction against company profits for the pemiums incurred and paid by your company which is technically correct - they won't actively flag up though that the benefit charge on you is likely matching (deemed income) and that the company also potentially has the sting in the tail that it will need to pay a class1a charge nearly of nearly 14% on benefit amount.

The named policy holder is understandable here, as they were only taken our 12 months ago with no health changes they would be unlikely to have moved too far in premium, but you still say it may in many cases still be a taxable benefit?
Lambs is 100% correct - however as Lambs is highlighting IF the new policy is a qualifying relevant life policy that meets the relevant criteria you may be ok - you should always be wary about being led up the garden path though by salespeople of IFA's without ensuring you you are getting the whole picture and that should default to asking (a) is the item likely to be taxable on me as an individual (b) are there active measures that need to be taken to claim relief and restrictions ref amounts paid (c) are payouts received tax free? (d) what active measures do i need to take in ensuring premiums are fully compliant and (e) who are payouts made to?

The final "con" here can sometimes be that if the company is a beneficiary and if claims tax deductions for premiums then payouts made to company could be subject to tax - this could negate the overall tax benefit or worse still leave you with a shortfall if you get unexpected tax bill on proceeds.
eg if company takes out key man insurance so that company receives money when you can't work - practicably speaking benefit may be minimal if if premiums get 19% tax relief but payout is taxed so you get 19% less payout after providing for tax !!

Here is a starter for 10 ref how complicated it gets with qualifying life policies which MAY at face value seem the the most tax efficient option if they presented as being the best option (which i suspect they are)
https://www.cii.co.uk/learning-index/articles/the-premium-limitation-on-qualifying-life-policies-and-restricted-relief-qualifying-policies-part-4/72782

chocolatespatula
Posts:11
Joined:Tue Mar 02, 2021 10:00 pm

Re: Transfer personal insurances to Ltd Company

Postby chocolatespatula » Thu Mar 04, 2021 2:54 pm

great answer, thankyou


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