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Keyperson/Shareholder Protection :
Keyperson :
This type of assurance is to cover the life and/or critical illness of key personnel. If the employee died or was seriously ill this would affect the profitability of the company.
There are two ways the employer can pay for this.
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Term
Assurance :
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- Company chooses a term, i.e. 5 years.
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Whole
of Life :
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- Which by definition is for no set term and very unlikely to receive tax relief on the premiums. |
With
regard to taxation :
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Employer
:
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If they receive Corporation Tax relief on premiums paid, the death benefit lump sum would be paid to the company as a trading receipt and subject to Corporation Tax. Alternatively if the company receives no tax relief on premiums (for instance if a whole of life plan is used, or a shareholding director is the keyman) the death benefit lump sum is paid to the company as a capital receipt and is not subject to corporation Tax. |
Which of the above methods is used depends on the type of policy. Normally tax relief is available on Term Assurance policies but generally not available for Whole Life policies. The taxation treatment is very much a matter for the company's local tax inspector and we advise that confirmation of the taxation position of the proposed policy is sought from him.
Shareholder Protection :
How best to protect the interests of surviving shareholders or partners after the death or critical illness of one of the shareholders? Life assurance, Trusts, double Option agreements etc. - Manaton can put forward solutions to meet everyone's best interests, in association with our solicitor and accountant contacts.
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