Shareholders or for that matter employers of small companies can face quite a critical situation in case one of them suffers an untimely death. In case there are 3 shareholders with small amounts of shares in the company and if one of them dies the other two are left in a fix as they either have to pay the share contributed by the deceased earlier, to his family or else invite someone from the family with no prior experience, to join the business as one of the shareholders. Moreover small company directors had also been saddled with tax issues while dealing with life insurance coverage as they were taxed on the same if it was paid from the business account. If the coverage was paid from the employer’s own account it would probably be a paid from an income earned post tax. Smaller companies have had to consistently deal with these kinds of problems owing to the fact that they could not even avail the tax benefits from group insurance schemes, like the larger companies do.
The introduction of Relevant Life Legislation however has changed things for better for these small company employers. In fact a Relevant Life Policy is only available to small companies having more than five employees. But as per the legislation the company cannot have a large number of employees as they can qualify for the group insurance scheme.
Owners of the Limited companies can avail the Relevant Life Policy when they want to set up a death in service benefit for their employees.
The company pays the premium and as there is no benefit in kind charge, the premiums thus paid are exempt from tax restrictions. Moreover a discretionary trust is set up with the families of employees named as beneficiaries.
Other advantages of Relevant Life Legislation
- The premiums are not subject National Insurance for employees
- If you are able to establish the Relevant Life Insurance as your business expenses then you might as well be entitled to tax relief
- It is particularly advantageous for people in the high income group as they don’t want to attach it to their Pension Allowance
How to find Relevant Life Insurance
Owners of small companies can find a number of Relevant Life Providers online. You can also avail the Relevant Life Calculator to calculate the expenses to be shelled out as the premiums by entering certain details like national insurance rates, premium amount, required tax rates, corporation tax rate etc. It is completely advisable and agreeable if you would want to hold prior discussions with your financial advisor before settling for your preferred insurance carrier. But do know for a fact that the Relevant Life Legislation has come as a huge boon for small businessmen and as an owner of a small business if you are yet to explore its benefits then it is advisable that you do start gathering relevant information on the same. Please do not treat this policy as a tax avoidance measure no matter whatever tax benefits does it entail. Also remember, that the policy does not have a surrender value.
Now that you have a fair idea about what this policy is all about you can jolly well seek its benefits as an employer, thereby setting up a sound employee retention method for your company, with the added advantage of the tax benefits!
About the Author:
SidneyT has been keenly interested in writing about varied financial matters from time to time. Only a few years back did she take to writing about insurance related matters like Relevant Life Cover, Relevant Life Providers etc in her blogs and articles.