18 law
Tax-efficient life cover: make it relevant and save 50% in costs
For many smaller companies it is not always possible to set up tax-efficient company group life assurance schemes due to too few employees, writes Phil Hasell, chartered financial planner, Blandy & Blandy LLP
Life cover is therefore usually set up as a series of individual policies with premiums paid directly by the individual. This often has significant additional costs (over and above the actual cost of life assurance itself) in the form of personal income tax up to 50% (whether directly through PAYE or as a Benefit in Kind (BiK) tax charge). In addition, employee and national insurance contributions could add a further approximate 16% to the cost of insurance.
Relevant life policies
Rather than setting up personal life policies a significant tax saving could be made by setting up a Relevant Life
Policy (RLP). To all intents and purposes an RLP looks and feels the same as a personal plan. The exception is that it is a single life plan, taken out on the life of an employee by an employer (note therefore the limitations with an LLP where no employer/employee relationship exists). The policies must not contain added benefits such as critical illness or income protection and benefits must cease before age 75.
The company would make the payments and (assuming all relevant criteria is met):
• Premiums would usually be an allowable deduction against corporation tax
• No liability to employer and employee NI on the premiums
• No employee liability to income tax on the premiums (either directly or as a BiK)
• Premiums are not considered for the purposes of the pension annual allowance nor are the death benefits part of the individual’s lifetime allowance
• Benefits are usually paid free of tax to beneficiaries.
Tax saving example
Consider a director whose monthly premium for life assurance is £150. Assuming personal tax at 40% as well as employee and employer NI, after accounting for corporation tax relief the total cost of the premium if the director paid the premiums personally would be £235.45. By paying through a RLP the premiums would be
BIM has the potential to revolutionalise the construction industry
There was talk of a new revolution at Reading- based Clarkslegal and Kier Construction’s recent seminar, where a panel of top industry experts gave delegates a detailed insight into the impact that Building Information Modelling (BIM) is expected to have across the construction and housing sectors from here on.
Leading the panel discussion was Clarkslegal’s construction partner Jessica Taylor and Kier’s processing & engineering managing director Graeme Forbes, alongside Professor Jennifer Whyte of the University of Reading, Graham Clarkson of The Clarkson Alliance and Elliott Wingfield of Ridge and Partners.
Professor Jennifer Whyte kicked off the seminar by exploring the positive impact BIM will have as a controlled process
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in relation to client needs, concluding that “the value to the client is crucial”. Professor Whyte leads inter-disciplinary research to develop new tools and processes for the design of buildings and infrastructure and so the concept of BIM and developing collectively shared sets of information to improve the design process is central to her work.
This take on BIM envisages the huge opportunities to improve significantly the service provided by the industry to clients. This is a key theme that was threaded throughout the seminar.
According to Graeme Forbes the use of BIM is not an ideal but an essential: “With BIM there is no double-handling information with manual processes and fragmented systems. Instead the information is streamlined so
that everyone has the ability to access one central system.” Forbes concluded: “BIM doesn’t just change the workflow – it changes the process.”
Elliott Wingfield specialises in BIM implementation at Ridge whilst also tutoring in Architecture at Oxford Brookes University, and so was more than prepared to give the audience a full explanation into the misconceptions regarding the tools, referring to the process as “Better Information Management”.
Jessica Taylor, whose work includes the drafting and negotiation of major strategic and operational commercial and construction contracts emphasised that in the BIM contractual process “clarity is the watchword”. She focused on the legal implications of BIM procurement including professional liability and
£120, again after accounting for corporation tax relief; a total saving of 49% on each and every premium.
Such plans are not only applicable for directors. They can equally be relevant for individual members of larger schemes where the life cover required is above that available from the group policy.
Details: Phil Hasell
Phil.hasell@blandy.co.uk 0118-9516915
insurance issues, and the protocols that must be incorporated into all project contracts for BIM to be implemented and operate effectively.
An expert in his field at delivering construction projects that benefit public and third sector organisations, Graham Clarkson presented to the audience new, more efficient and collaborative ways of working with BIM to achieve a reduction in construction costs and waste.
Comparing the current UK construction industry to World War One, the fall of aristocracy and the rise of democracy, Clarkson spoke of the strong hold that traditional professions have had over the construction sector and how these professions need to serve clients better: “For a change to be brought about there often has to be a catalyst. This catalyst is BIM and has the potential to revolutionalise our industry.”
Details:
www.clarkslegal.com THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2013
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