Life Insurance, BIK

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noodles
noodles Registered Posts: 308 Dedicated contributor 🦉
Okay, if a life insurance policy in the name of the directors and directors benefit (husband wife) is paid via expense claims from company bank account, how would you treat this in a ltd company. Would you put it as allowable and BIK, dir loan etc etc

comments appreciated.

Thank you

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  • groundy
    groundy Registered Posts: 495 Dedicated contributor 🦉
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    Debit directors loan account
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    If the company bears an expense, a BIK will occur.

    It's probably far more tax efficient to do as groundy says and debit DLA, thus they bear the expense personally.
  • Jmann
    Jmann Registered Posts: 68 Regular contributor ⭐
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    Who will benefit in the even of payout? company or estate of the director?
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    Where I work we all have a life insurance cover of 4 times salary. But we don't pay a BIK, the auditer have a thorough look into this, and came back leaving it the way it is...

    It was seen as part of our employment package.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    If the company is the beneficiary, then there is no BIK AFAIK.

    Note: if the company claims tax relief on insurance premiums (of which it is the beneficiary), any insurance payout is taxable. I have a client who opts not to claim tax relief on the premiums to keep any payout tax free.
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    Monsoon wrote: »
    If the company is the beneficiary, then there is no BIK AFAIK.

    Does this happen often? Seems odd the company benefits financially for the death of an employee, fair enough if its a highly specialised hard to replace person.
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    Sometimes the company is the beneficiary and then the payout to the employee is via payroll and therefore taxed.

    Death in service is not a BIK but other types of insurance may be, the HMRC website is particularly remiss when it comes to BIK insurance as I found out recently!!
  • noodles
    noodles Registered Posts: 308 Dedicated contributor 🦉
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    it is the directors who benefit and not linked to the company at all. they claimed it each month through their expense claims so the company has therefore paid. I read on the web yesterday that it does not matter if you put it through the company and reduce corp tax and do a BIK or put to dir loan. should the company have reduced corp tax if it is nothing to do with the company ........
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    I would either put it through dir loan and no deduction against ct or it is a BIK and part of employment package and therefore allowable against ct, can you put a link to what you have read because I'm not sure what you mean?

    Obviously things could get difficult if a BIK wasn't declared on the P11d and there's not enough in the directors loan!
  • noodles
    noodles Registered Posts: 308 Dedicated contributor 🦉
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    it would take me ages to re find the link, I searched through hundreds and they were all very vague and differing opinions. I have already put this in as a company expense and through the P11D but now I am wondering if I have done the correct thing.
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    I don't think you have done anything wrong, to be absolutely sure it could be in their employment contract as part of their package - assuming they even have one!

    I have a company that I treat in exactly the same way that you have.
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    Monsoon wrote: »
    If the company is the beneficiary, then there is no BIK AFAIK.

    Note: if the company claims tax relief on insurance premiums (of which it is the beneficiary), any insurance payout is taxable. I have a client who opts not to claim tax relief on the premiums to keep any payout tax free.
    Sometimes the company is the beneficiary and then the payout to the employee is via payroll and therefore taxed.

    Death in service is not a BIK but other types of insurance may be, the HMRC website is particularly remiss when it comes to BIK insurance as I found out recently!!

    Thanks, that makes more sense now. So death in service is never BIK? Only the additional health cover.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    Sounds badly set up to me.

    If it is the individual's own policy that they are expensing into the company then that may even be a payroll issue rather than a BIK.

    I notice that the insurance companies have recently been flogging a new type of life insurance that is allowable for the company and not a BIK for the employee. This has only been available quite recently though.
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