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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
Learn Change and Adapt ?????
I am sure it could be done that way
I think you are right
im still reading up on it
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.
_________________________________________________________________________The above post is not financial advice, its often me rambling - passing time on a coffee break.If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance._________________________________________________________________________
Thanks Adam I am sure your right
I have made an appointment to see an IFA
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 "
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Hope that helps.
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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
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.
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