Business Protection
How would your business cope if it a key employee or director were to pass away?
You will find that the success of almost all small and medium-sized businesses is dependent on a few people who make a significant contribution.
These key people can include the owners, senior directors, sales people, production managers, research and development staff or other people with specialist skills or knowledge. Often a person’s value to the business is reflected in their remuneration package. When you are trying to identify the key people this can be a good place to start, although this may not always be the case.
Whatever the key person does, their loss could have disastrous consequences for the business. Some of the problems the business may face are:
• Loss of profits.
• The need to recruit or train a replacement.
• Loss of important personal or business contacts.
• Difficulties in meeting existing loan repayments.
• Loss of confidence from suppliers and customers.
• Difficulties in raising new finance for new developments.
• Loss of detailed knowledge of the businesses processes and systems.
• Having to repay a loan the key person has made to the business.
• Loss of goodwill.
Having the right protection in place can help to ease all of these problems. As a firm of IFA's we can advise you on all areas of Business Protection in order to provide a cash injection if the key person dies or suffers a critical illness. It can also provide a regular income for the business if the key person is temporarily disabled and unable to work. It can’t stop the unthinkable from happening, but it can make dealing with the consequences a little easier.
Directors Life Cover
Up until recent legislative change the limits of life cover allowed to be paid for by the company on behalf of a director without being a benefit in kind were very restrictive, however, things have moved on and it is now possible for Directors and key employees to have substantial levels of cover whilst being treated as a business expense for tax purposes with no tax disadvantage to the individual.
A relevant life policy is an alternative way of providing a lump sum on death for an individual, without the need to set up a registered group life scheme.
Who are relevant life policies aimed at?
The policy is aimed primarily at 2 groups:
• High-earning employees who have substantial pension funds and don’t want their death-in-service benefits to form part of their lifetime allowance.
• Small businesses that don’t have enough eligible employees to warrant a group life scheme.
Relevant life policies can also be used by directors of the company.
A relevant life policy is an alternative way of providing a lump sum on death for an individual, without the need to set up a registered group life scheme.
Provided the arrangement meets the criteria below, a relevant life policy has a number of advantages:
• The benefit won’t form part of the employee’s lifetime pension allowance.
• The premiums paid won’t form part of the employee’s annual allowance. The annual allowance is the amount that can be contributed by, or on behalf of, an individual to any registered pension scheme with the benefit of tax relief. So the employee is still able to make full use of their annual allowance to make contributions to a registered pension scheme.
• Premiums paid by employers are not normally assessable on the employee as a benefit in kind so they’re not subject to income tax.
• Premiums paid by employers are not normally assessable for employer or employee National Insurance contributions.
As a fully qualified IFA we will guide you through the whole process and make specific recommendations that suit you and your business. We will arrange for one of our IFA’s to visit you at your place of work or home. We have IFA’s based in London, Beckenham and Bromley who are happy to travel anywhere in London and the South East.
London IFA 02087685796
Bromley IFA 07824444887
Beckenham IFA 07920854906