How the tax man can help you! (as an employer/business owner)

 

Business owners work tirelessly to make a success of their chosen career path, their livelihood and often what is the sole means of maintaining their families standard of living. Endless hours are spent refining a business plan, networking in order to generate awareness and a client base and often late nights missing family occasions to meet deadlines. We all like to benefit as much as possible from the effort we put in but we always have to remember to give our bit to George Osbourne.

 

As an employer or business owner there are minimal ways to lower the figure on your inevitable tax bill that your friendly accountant (hopefully also a Chamber member) provides you with at the end of a hard working business year. As someone who works with business owners advising them on their business finances, reducing tax, and creating more personal benefits from the business as a whole is a key theme of the conversations I often have.

 

Fortunately for all of us there is a way of saving tax. A change in legislation has brought about a way to provide life cover for paid directors and employees of businesses that aren't large enough to run a group scheme.

 

These policies are called Relevant Life Plans and is a life assurance plan that provides death-inservice benefits for employees of a business. The plan is established and paid for by the company on the life of the employee or director, but any benefits from the plan are paid to a discretionary trust and then to the nominated beneficiaries of the trust who will likely be the family members and dependents of the life assured.

 

This is tax advantageous because while the contributions will be paid for by the company, they will not be treated as a benefit in kind (P11D benefit) so will not be taxable on the life assured for whom the plan has been set up. This can provide a significant tax saving, particularly for higher and additional rate tax payers. Furthermore, the contributions paid to fund the plan should be treated as an allowable business expense for the company. How this translates to monetary figures is demonstrated in the example below:

 

 

So its worth considering whether your business can support your life insurance needs rather than using your taxed salary. Its also worth considering whether providing a relevant life policy should form part of your employees employment package; offering a combination of salary and benefits helps retain and recruit the best people who will ultimately help further your business. The numbers stack up, you can get a benefit from the business and you can save yourself some tax. This is one product that I always talk about with business owners and something that is not widely known about.