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SPV - relevant life, allowable expense?

Is the director of a SPV allowed to buy relevant life, paid for by the company?

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Hi,

Is the director of a SPV allowed to buy relevant life insurance, with premiums paid for by the company as an allowable business expense?

As a non-trading company, are there any allowable business expenses other than mortgage interest, estate agent fees, accountancy fees and any fees associated with the properties such as maintanence etc?

 

Thank you

 

 

Replies (9)

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By DKB-Sheffield
20th Aug 2021 14:45

The main questions would be as follows...

1. You don't mention the purpose of the SPV, or what it is in place for. I am assuming (and it is just an assumption) that it is in some way property related.

2. Who benefits from the policy (company or family). If the latter, or partially the latter, generally "no". Are you instead referring to a Key Person Policy?

3. If the SPV is truly "non trading" with no "investment income", I'd even be questionning whether the expenditure you've mentionned is allowable? I can't really see how estate agency fees are incurred for a company with no reportable activity.

4. What advice have you received from elsewhere (accountant, tax advisor etc.)

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Replying to DKB-Sheffield:
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By The Dullard
20th Aug 2021 22:24

1. From the OP's description, I'm guessing it's a property investment company.
2. The OP clearly states that it is a relevant life policy, and not Keyman insurance.
3. The OP doesn't say that there's no investment income, just that it's non-trading. The fact that the OP considers these expenses "allowable" strongly suggests rental business.
4. The whole world does seem pretty clueless on the topic, based on the responses in this thread, to be fair.

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By Dib
20th Aug 2021 14:52

Yes, he is probably - he'll just get hit for a BIK probably.

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Replying to Dib:
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By More unearned luck
20th Aug 2021 15:37

The stated fact is that the policyholder is the director. The company is settling a pecuniary liability of the director and therefore the premiums should be subjected to PAYE &NIC. The cost would be allowable as directors' rem if the company had a trade or as part of management charges if it has investments, subject to limits.

With Key(wo)man insurance the policyholder and the beneficiary is the company.

To anyone: Are not all companies with a purpose special? What is the difference between "let's form a company for this project" and Let's form an SPV for this project"? Blinding by science.

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By Paul Crowley
20th Aug 2021 15:25

Do not know what the SPV is
LLP?
Ordinary partnership
Company limited by Guarantee

OR is it just a boring old Limited company
What is the purpose of SPV
Why is life insurance being paid
Who is beneficiary
HMRC look askance at insurance where the director is also a shareholder and has a vested interest and will benefit from a claim

So eitherway lots of issues

Estate agents fees?
Really a P & L item?
Or do you mean property management agent fees, deducted from rent?

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Replying to Paul Crowley:
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By More unearned luck
20th Aug 2021 15:48

"HMRC look askance at insurance where the director is also a shareholder and has a vested interest and will benefit from a claim". Unless the director does a John Stonehouse/Reggie Perrin how will he benefit from a claim on a life assurance policy where his life is the one insured?

I agree "estate agent fees" = commission for selling, "letting agent fees" commission for finding a tenant or managing a property including collecting the rents.

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Replying to More unearned luck:
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By Paul Crowley
20th Aug 2021 15:56

His estate benefits if he owns shares and the shares are worth more due to the company policy payout.
relevant for keyman

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Replying to Paul Crowley:
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By More unearned luck
20th Aug 2021 17:29

Indeed, but the director per se isn't benefiting. No one can benefit from post mortem events unless there is an afterlife, but there is no evidence of an afterlife.

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By The Dullard
20th Aug 2021 22:19

Apparently nobody on AccountingWeb has heard of a relevant life policy!

The employer pays for a relevant life policy that will pay out to the employee's estate/nominee on their death and/or to the employee in the event of critical illness, which isn't a pecuniary liability (the company is the policyholder, the life insured is the employee's and the beneficiary is the employee or their estate/nominee).

If the company has investment business, then it can be claimed as a management expense (it's a form of remuneration for the director), which can be set against the investment income. So, yes it is effectively an "allowable business expense".

And because it's a relevant life policy, there's no benefit in kind (ITEPA 2003, s 307), and no taxable employment income when the policy pays out s 393B(3)(c).

Prize for spouting the greatest amount of utter b0ll0x in the thread goes to More Unearned Luck.

"If you want an answer to a question that you can rely on, then you would be far better off taking paid for advice from somebody that knows what they're talking about rather than expecting to get it for free from a bunch of random numpties off the internet" - Tax Dragon. Well, she said something like that.

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