Business Protection

Relevant life premiums may qualify as an allowable business expense for corporation tax purposes, subject to the policy structure and the applicable tax rules. Proceeds are typically paid to beneficiaries via a relevant life trust.

Other forms of business protection may also qualify for tax relief where certain conditions are met, including the principles commonly referred to as the Anderson Principles. However, the tax treatment of both premiums and policy proceeds will depend on the specific circumstances and policy structure.

Enness does not provide tax advice. It is important to seek guidance from a qualified accountant or tax adviser before arranging business protection to understand the potential tax implications.

Key person insurance is designed to provide financial resilience to a business if a key individual dies or becomes critically ill, subject to the terms of the policy.

The proceeds can help offset the financial impact of losing an individual whose skills, relationships, knowledge, or contribution to revenue are particularly important to the business. This may include helping to replace lost income, cover recruitment costs, or support the business while a suitable replacement is found.

The level of cover is typically based on the individual’s financial contribution to the business, which may be assessed using factors such as their contribution to profits, salary, or the potential financial impact of their absence.

If you are taking a PAYE salary from your limited company, relevant life insurance is a brilliant way to provide cover to your family as these policies are written into trust for the benefit of your loved ones. It is a completely tax deductible business expense and if you wish to exit your business, you can take over the policy ownership personally.

When a business has two or more shareholders, the death of one of these can have substantial effects on the remaining owners. The shares are usually passed onto family members who need compensating for and the company can then buy the shares back. Shareholder protection will ensure that funds are reserved for this and the correct shareholder agreement are put in place.

Business protection insurance is commonly used by company directors, shareholders, partners, and business owners who want to help protect the financial stability and continuity of their business if a key individual becomes seriously ill or passes away.

Depending on the type of cover, a policy may provide financial support where a key decision-maker, shareholder, or revenue-generating individual is no longer able to contribute to the business. This could help protect working capital, support loan repayments, cover the costs of finding a replacement, or enable remaining shareholders to retain control of the company.

Business protection can be particularly important for privately owned companies, partnerships, and founder-led businesses where ownership and operational responsibility are concentrated among a small number of individuals.

Working with a specialist adviser can help ensure the policy is structured appropriately alongside shareholder agreements, lending arrangements, and long-term succession planning objectives.