axa business protection l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
AXA Business Protection PowerPoint Presentation
Download Presentation
AXA Business Protection

Loading in 2 Seconds...

play fullscreen
1 / 20

AXA Business Protection - PowerPoint PPT Presentation


  • 194 Views
  • Uploaded on

AXA Business Protection. Key Person and Loan Protection. Key Person Protection. Topics to cover…. Background to Key Person How it works How to calculate cover Taxation Loan Protection. Key Person Protection. Tax.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'AXA Business Protection' - harlow


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
axa business protection

AXA Business Protection

Key Person and Loan Protection

key person protection
Key Person Protection

Topics to cover…

  • Background to Key Person
  • How it works
  • How to calculate cover
  • Taxation
  • Loan Protection
key person protection3
Key Person Protection

Tax

We offer some information about tax within this presentation. This information is based on our understanding of current UK Tax legislation. Tax rules are subject to change and their value depends on the customers circumstances.

key person protection4
Key Person Protection

What is it for?

  • The protection of business profits
  • The protection of business loans
  • The protection of directors loans

You can offer your clients

Life Cover, Life or Early Critical Illness Cover

or Critical Illness Cover

key person protection5
Key Person Protection

Identifying the need…

Business reports and accounts can assist in identifying the need for Key Person Protection. They may detail:

  • Names of directors and their shareholding
  • Directors’ remuneration
  • Turnover, gross and net profit
  • Liabilities
  • Amounts owed on directors loans
  • Profit trends over a number of years
  • Number of employees and payroll costs
key person protection6

Business (Applicant)

Key Person Protection

How does it work?

Key Person (Life Assured)

key person protection7
Key Person Protection

Steps to writing business…

  • Identify the life assured…

Individuals whose skill, knowledge,

experience or leadership contribute

to the business’s financial success.

There may be one or a number of

people within a business whose

death or serious illness could lead

to a financial loss for the business.

key person protection8
Key Person Protection

Steps to writing business…

  • Identify the life assured
  • Calculate the level of cover required…

Multiple of salary calculation

or

Loss of profit calculation

key person protection9
Key Person Protection

Steps to writing business…

  • Identify the life assured
  • Calculate the level of cover required…

Multiple of salary calculation

For Life Cover:

Salary × maximum of 10

For Critical Illness Cover:

Salary × between 5-7

Loss of profit calculation

Either

5 x average net profit (3 years)

Or

2 x average gross profit (3 years)

key person protection10

Policy must be intended to meet loss of profits resulting from loss of services of employee

Sole relationship is that of employer and employee

Policy is an annual or short term insurance

Key Person Protection

Tax treatment…

The rules often referred to by the Local Inspector of Taxes are commonly known as the “Anderson Rules”. They state that premiums for Key Person Cover may be eligible for tax relief if the;

key person protection11

Premiums may receive corporation tax relief. Trading receipt may be taxable depending upon profitability

Premiums will not receive corporation tax relief. Benefits will be treated as capital receipt and not taxed

Key Person Protection

Tax treatment…

In summary, for Life and Critical Illness:

If the Anderson rules have been met:

If the Anderson rules have not been met:

We can offer your clients all options –

20 year guaranteed and 20 year reviewable

key person protection12

Consult the local

Inspector of Taxes

Key Person Protection

Tax treatment…

It is not a question of whether the businessclaims the relief, it is whether they are entitled to it

We have letters available on our website to send to HRMC

loan protection

Amount of cover = sum of the above

Loan Protection

What is it for?

Businesses, partnerships and sole traders need to borrow for:

  • New machinery
  • New premises
  • Credit or overdraft facility
  • General development/expansion
loan protection14
Loan Protection

Tax treatment…

Taxation of premiums

Premiums are not an allowable deduction from profits.

Taxation of benefits

Generally not liable to Corporation Tax

key person and loan protection
Key Person and Loan Protection

Summary…

You should now know about;

  • The different types of cover available and how they work
  • How to calculate the level of cover
  • The tax treatment for cover premium/proceeds

Remember!

key person and loan protection16

Key Person Protection is to replace loss of profits caused by the death or serious illness of the key person

Loan Protection is to repay outstanding debts or loans in those circumstances

Key Person and Loan Protection

Summary…

You should now know about;

  • The different types of cover available and how they work
  • How to calculate the level of cover
  • The tax treatment for cover premium/proceeds
key person and loan protection17
Key Person and Loan Protection…

= risk mitigation!

The protection of business profits

The protection of business loans

The protection of directors loans

key person and loan protection18

Turnover

Gross Profit

Net Profit

2004

£3.4 million

£1.3 million

£328,000

2005

£3.4 million

£1.2 million

-£21,000 (loss)

2006

£3.3 million

£1.3 million

£490,000

Key Person and Loan Protection

Case study…

Your client is Male, 48 years old, amanaging director of Sapphire Group limited.

The business supplies chemicals to the brewery and catering industries. Have been in business for 4 years. His remuneration for the last 3 years has been £55k, £59k and £59k.

Business accounts reveal this picture:

The company has applied for £1 million key person cover on the life of the sales director - the company estimates he contributes 33% to company profits’. He is also a major shareholder of the company.

The purpose of the cover is to cover the potential loss in profits.

key person and loan protection19
Key Person and Loan Protection

Case study…

Can you…

  • Calculate the key person sum assured?
  • Who will own the policy? And why?
  • Who will pay the premiums?
  • What criteria would the business have to satisfy to obtain tax relief on contributions? Explain?
  • Assuming the business cannot claim tax relief on the contributions, what will happen to the sum assured, should a claim arise.
  • What advice would you give regarding how the benefits might be treated by HMRC
key person and loan protection20

Read our:

  • AXA Protection Account - Business Protection Guide
  • Quick Reference FAQ
  • Or visit
  • www.axa.co.uk/advisers/protection
Key Person and Loan Protection

Questions and further information…

Any Questions?

For further

information