Having now secured some clients and really enjoying the work I am finding each client brings with them a new issue which I don't have experience with.
For instance one of my clients has asked me to put a large health insurance policy payment (£6k+) through his business. He is the only employee of the company and so I can only assume given the amount that the insurance may also be for his family.
Firstly, is it ok to put health insurance through the company and what is the correct way to process it?
Second, should I be questioning who the insurance is for? I think I already know the answer to this but any words of wisdom out there would be gratefully received.
there are various different types of insurance. Some are acceptable some are not.
The general rule is that if the beneficiary is the business then it is allowable. If the beneficiary is the owner of the business then it is not.
For example. A key person policy may be considered business insurance against the owner of the business being unable to work so would receive financial help from the inssurance company which could continue to pay the directors wages during illness as well as covering other business expenditure.
Conversely, an insurance policy that pays the director directly in the event of ill health is nothing to do with the business and any contributions made by the business would be deemed an extension of salary.
The person advising the director on the sort of policy that they needed should have addressed that when setting up the policy.
Check the small print to see what sort of policy it is and who the beneficiary is.
If it genuinely is health insurance for the director not the business then it is not an allowable expense.
Hope that helps,
kind regards,
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 have it on good authority (A Financial Advisor) that some insurance policys are allowable but ONLY if the business is a Ltd Co. I can try to get more details if you like but I'm not sure if this is the same as what your talking about Shamus. His (the FA) line is he can get you a insurance policy that the business pays for you and is 100% allowable...
But then again he may be wrong when it comes to actually doing the accounts...
It is a Ltd company. I'm fairly certain this is medical insurance bought privately but I'm going to ask a few extra questions next time I see him to get more clarity.
there are various different types of insurance. Some are acceptable some are not.
The general rule is that if the beneficiary is the business then it is allowable. If the beneficiary is the owner of the business then it is not.
For example. A key person policy may be considered business insurance against the owner of the business being unable to work so would receive financial help from the inssurance company which could continue to pay the directors wages during illness as well as covering other business expenditure.
Conversely, an insurance policy that pays the director directly in the event of ill health is nothing to do with the business and any contributions made by the business would be deemed an extension of salary.
The person advising the director on the sort of policy that they needed should have addressed that when setting up the policy.
Check the small print to see what sort of policy it is and who the beneficiary is.
If it genuinely is health insurance for the director not the business then it is not an allowable expense.
Hope that helps,
kind regards,
Shaun.
Hi Shaun
Question purely for interest sake (as we have no medical insurance within business), but back when I was "employed" the offer of medical insurance for employee and family was common and popular (with employees that is), but do I take it from your reply that the cost of these policies were not only added to P11D and tax paid by employee, but also disallowed as an expense for the company too (so CT paid too)?
Not that we are thinking of offering or taking such ourselves, but am just interested to know?
Larger employers tend to arrange dispensations for employee benefits such as health / dental insurance and gym membership that would otherwise have been P11D items.
On site gyms, opticians and dental practices would be treated the same as on site canteens provided that they are available on equal terms to all employee's so no tax liability on the employee for that.
Again though, employers of that size have very close working relationships with HMRC and get such matters cleared up without allowing employee's to have any element of the goodwill created by the benefits erroded by HMRC.
Smaller employers offering those Perquisites are creating P11D items for employee's unless they too sort out a dispensation / take the tax burden on themselves.
kind regards,
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.
