I have recently taken out Relevant Life Insurance and this explain why.
When you are formally employed and working for a large company, you can benefit from group life schemes and death in service.
When you work for yourself however, as a contractor and company Director, you will likely be paying for life insurance out of your own pocket and taxed income.
This no longer needs to be the case.
Relevant Life Insurance was designed to afford small businesses the opportunity to benefit from the same tax breaks large corporations enjoy through group life schemes. Essentially,
a Relevant Life Policy allows for you to pay your personal life insurance through your company and as a business expense, rather than through taxed income.
Paying for your life insurance through your business in this way means that you can make significant savings:
Let’s use the example that you own your own business and pay £100 a month on life insurance from your own pocket.
If you’re a 40% taxpayer, there’s income tax and 2% employee national insurance contribution, plus 13.8% employers’ national insurance contribution.
In fact, after 19% corporation tax relief the net cost to your company works out at £158.93
If you pay £100 a month for a Relevant Life Plan you won’t pay any national insurance contributions or income tax on the premiums but you still get the 19% corporation tax relief which means the net cost is only £81.
That’s a saving of £77.93 a month or £935.16 over the year.
To qualify for a Relevant Life Insurance policy you or your client simply need to be a salaried Director or an employee of a limited company and resident in the UK.
This often causes confusion, firstly because many people wrongly assume that IPT (Insurance Premium Tax) is VAT, it isn’t! and then when they make a claim they may get a VAT only invoice.
HMRC VIT13500 has the answer…
Insurers cannot recover any VAT incurred in obtaining replacement goods or having repairs carried out for a policy holder. The supply of goods (or services in the case of repairs) is considered to be made to the policy holder. This is so even when payment is made directly to the supplier by the insurer.
Subject to the normal rules a VAT registered policy holder may treat any VAT incurred on the supply as input tax. The insurer will normally pay the policy holder compensation exclusive of VAT. The policy holder will pay the supplier the tax and recover it as input tax.
If an insurance claim is for loss or damage at a domestic property you should make sure that any VAT claimed as input tax relates only to goods used for a business purpose.
Insurance and reinsurance is exempt from VAT under article 135 of the Sixth VAT Directive.
This also explains why an insurer may ask a contractor engaged in repair work not to invoice them VAT, its simply that they want the VAT only element to be invoiced to the insured.
This case involves a Project Manager who tried to limit his liability on a Construction Project
The Trustees of Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd  EWHC 2137 (TCC)
In summary the dispute was between the Project Manager and the employer over the building of new boarding accomodation the quality of work was not disputed but there were delays.
The Employer claimed that if the Project Manager had acted with care and skill, it would have ensured the Contractor execute the building contract (rather than letters of intent) and that would have produced a more advantageous outcome in the dispute with the Contractor for delay, as the Contractor would have been liable for liquidated damages.
When submitting its fee proposal for this project, the Project Manager attached its standard terms and conditions, including a limitation of liability which had not formed part of the Project Manager’s appointment on two earlier projects at the college. A limitation on liability incorporated into the Project Manager’s retainer, on this third project was found to be unenforceable as it did not meet the requirement of “reasonableness” as set out in the Unfair Contract Terms Act (UCTA) 1977.
Had the limitation been enforceable, the Project Manager’s liability would have been limited to the amount of its fee, which totalled £111,321. The Employer was instead awarded damages of £226,667.
The case has been circulate and written up by Law Now
Well worth a read
Since 1992, an agreement has been in place between the Association of British Insurers (‘ABI’) and the British Banking Association (‘BBA’) whereby a bank could notify its interest in relation to secured properties and the insurers would tell the bank of any cancellation or alteration in cover, with a grace period to allow the bank to arrange its own policy if the borrower had failed to maintain the required cover.
Last September the ABI announced that they were ending this agreement and that co-insured status either as Joint Insured or Composite Insured would be the only options open to Banks. These options are likely to increase insurance premiums.
Banking sources tell me that last week it was agreed that ABI would extend the agreement with BBA to December 2012, the BBA are yet to issue guidance and comment.