if its a work related insurance i would imagine yes, if its just your bog standard life insursnce that everyone has for mortgage purposes then i would think no, as it has nothing to do with the business.
The issue is who is the beneficiary of the insurance.
If the business is the beneficiary such as in the case of a key person policy then it is allowable.
If payout is to family or for the banefit of the family of the bereaved then it is not.
Take a common example of life insurance taken out for a business loan which pays only the loan company on death of the insured. That would be a gegitimate expense.
However, take out an insurance policy to pay off a loan taken privately that was used to inject capital into the business and it is not allowable as the beneficiary is the persons estate rather than the business.
Its much less messy with limited companies than with sole traders as where the person is the business proving what is business and what is private can be problematic to the point of what the point even trying.
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think that with this situation there has to be the usual separation of the accounts drawn up for the business, and the accounts drawn up for tax. The basis of my argument revolves around the tax situation.
Claiming any asset for business purposes has to be wholly and necessary for a sole trader/ partnership but not exclusively. Therefore an allocation of business use can be separated from private use, say 50:50, or 75:25. As with a car, or a computer.
The cost of which can be adjusted for private use, e.g. the asset plus the running costs, which would include any insurance to specifically protect the asset. At the end of the day the individual has already paid from profits (or from future profits, in the form of a loan) for these assets, therefore they are protecting something that is used by the business.
With a loan the trader/ partners, are being advanced money against future profits. The advance of money itself is not the traders/ partners, they will claim relief on what they buy with the loan. The insurance policy may bypass the individual but ultimately they benefit as it stops the lender seizing their personal assets to cover the loan. It is compounded when the lender insists that default protection is in place but the liability remains the same, as there is a choice to accept or decline the offer.
Still don't think that has explained it well but the sun is still shining
My understanding is that for a sole trader, or partnership, any life assurance/ loan protection insurance is not a business expense (for tax purposes).
The most difficult concept to get your head around is the business loan protection. Although it is protecting a loan the beneficiary is still the sole trader, or the partners.
It is not easy to explain but basically as it would be protecting capital, and capital belongs to the sole trader/ partners then they are ultimately the beneficiaries.
Another way to look at it is that a loan is a debt, a debt is the sole responsibility of the individual(s), again they are ultimately the beneficiaries.
In the HMRC guide for completing partnership returns, it specifically mentions not including partner insurance in the expenses.
As Shaun has said though, in a ltd company, the situation is different.
It takes the arguement that I put forwards one step further in that for a sole trader the business is the person so it is they rather than the business that would be the ultimate beneficiary.
(thinks. ok, think that I've lulled him into the belief that the blue touch paper went out as it disappeared inside the firework, lol)
But of course.... Using that arguement everything that a sole trader buys is theirs not the businesses so why are they allowed capaital allowances against expenditure?
Its because despite legal form the business is to some extent seperate to the individual and for the same reasoning as capital allowances I could see the arguement that loan protection peculaiar to assets used by the business of a self employed person would be allowable and may even be incorporated within the cost of the asset where such was a necessary part of the purchase.
For example. if a computer and warrantly are only available together with the cost of the warranty inseperable and incorporated within the cost of the item then the product assurance which could be a replacement or refund is allowable as part of the original asset regardless of the business form.
lol. I love it when we get all theoretical.
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
but the sun is still shining
