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  • Mortgages & Finance

    Key Man Insurance

    Hi

    I would like your views on Key Man Assurance

    I run a Ltd co and the company owns residential Investment property which have Mortgages

    The Mortgages are Capital and Repayment over a 25 year  term

    I would like to run a a decreasing term insurance policy to pay off the Mortgages if I passed away  II am the Guarantor for the Co Mortgages

    If I start a Policy and the company pays the premium is it tax deductible from Corporation Tax

    I would be the Insured but the Policy would belong to the Company

    Any Guidance would be helpful

    Thanks DL

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    Learn Change and Adapt ?????

    I am sure it could be done that way

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    I think you are right

    im still reading up on it

    tks DL

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    Learn Change and Adapt ?????

    Yes - Key Man Insurance is for the company to take out on Key People in a Business.
    It is paid by the Company therefore Taxed as such.

    The remaining shareholders & those who inherit your share can decide what to do with the funds. Typically it is used to hire a replacement but in property context then - sure it can be used to pay off mortgages.

    You should take some profeshional advice - typicaly Trusts are used in which the money is paid. Therefore the funds are not stuck in the "estate" waiting for decisions on who can manage it, etc..
    That decision you have made in that it will be paid into trust and that trust will use it to pay down mortgages etc..
    Take some advice.

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    Looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance. The above is not financial advice, its me rambling - just passing time on a coffee break.

    Thanks Adam I am sure your right

    I have made an appointment to see an IFA

     

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    Learn Change and Adapt ?????

    Tax advice should be confirmed for your personal circumstances, but generically speaking (the following info is taken from an insurance company website, and not formal advice from me)   ;

    "TAX TREATMENT OF PREMIUMS

    There is no direct legislation on the subject of key person policies and therefore businesses should always consult their inspector of taxes. The principles were laid out back in 1944, when the Chancellor, John Anderson, made a statement around the tax treatment of key person policies.

    In summary he said that, provided that:

    1. the sole relationship is employer/employee;

    2. the cover is for loss of profits;

    and 3. the policy is a short term assurance a company’s tax inspector may allow corporation tax relief on the premiums.

    HM Revenue & Customs (HMRC) have also produced guidance as to whether key person policy premiums can be allowed as deductions by the business (Business Income Manual (BIM45525)). With respect to the term of a key person policy, HMRC state that it “should not extend beyond the period of the employee’s usefulness to the company.” If a key person is a substantial shareholder, it is unlikely that tax relief will be granted on the premiums. Policies with an investment element, for example an endowment, are unlikely to qualify either. TAX TREATMENT OF CLAIMS Generally speaking, if tax relief has been allowed on the premiums, the proceeds will be taxed as a trading receipt. If no tax relief has been received at outset, the proceeds will not be taxed. But this is merely a general statement: the tax treatment of premiums is independent to that of the tax treatment of proceeds. Much will depend on the judgement of the local tax inspector "

    For the initial and immediate, standard rate, life cover costs and quotes, you can use our free online service here >  https://www.propertytribesfinancialservic...nce-quotes

    To properly implement the plan, we strongly recommend face to face personal financial planning advice and our Advisers are available on 01206 654 444 anytime.

    Hope that helps.

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    _________________________________________________________________________

    Group websites;   (note - copy and paste URL links in to your address bar for direct links)

    *    For BTL's, residential mortgages, bridging, life cover and estate planning > PropertyTribesFinancialServices.com

    *    For commercial finance, complex BTL and HMO funding, development finance, international and expat mortgages, and portfolio BTL mortgage services > AssuredFunding.co.uk

    *    For online mortgage quotes > ptfs.co.uk/online-quotes/online-mortgage-quotes

    *    For online life insurance quotes > ptfs.co.uk/online-quotes/online-life-insurance-quotes

    Contact us > propertytribesfinancialservices.com/contact-us

    THat is a great help

    I am the Major shareholder (Director ) so I think I should be ok

    But I will check with my accountant  first

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    Learn Change and Adapt ?????

    When you say " I think I should be ok" what do you mean? The preceding post sets out that if you are a substantial shareholder then corporation tax relief on the premiums is NOT likely.


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    I am the Managing Director of the Company and I own share too

    I have been advised that the Company is the owner of the insurance policy and I am the sum assured

    All funds on my death are paid into the company and can only be used by the company to pay off mortgages to which I have given personal Guarantor

    I have also been informed its a company expense and can be claimed back on corp tax

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    Learn Change and Adapt ?????