Belfast Telegraph

Business Soapbox: Jayne Gibson

We ask an expert how will the government's crusade to reduce tax saving benefits affect people

Employees will be limited by investing in employer-sponsored pension schemes but there are opportunities available for directors and shareholders

The Government has been on a crusade to reduce tax saving benefits provided by employers for their employees.

Recent legislation has targeted employee benefit trusts and has limited the amounts that can be invested in employer-sponsored pension schemes.

From next year, the Government intends to introduce a cap on the maximum tax relief that can be claimed by individuals.

There are still some opportunities available for directors and shareholders of limited companies. Relevant life policies are standalone single life plans which provide a lump sum on death outside of a registered group life scheme.

The policy is taken out on the life of the employee, and the premiums paid can be treated as an allowable expense.

The premiums paid by the employer are not taxable on the employee as they are not normally treated as a benefit in kind.

The benefits for high earners are several. There would be a saving on the cost of the life cover as the premiums are essentially tax relieved against corporation tax, without incurring any income tax or national insurance charges on the director.

In addition, the death benefit would normally be paid via a discretionary trust and therefore not subject to inheritance tax.

The payment of premiums and provision of benefits would not impinge on the strict pension contribution and benefit rules now in place.

Jayne Gibson, FPFS is a chartered financial planner at North Financial Management LLP

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