Business Protection Customer Seminar
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Protecting your business
Protecting your business
What do you protect?

Property

Liability

Vehicles
?
Profits
?
Ownership
Today we will look at why and how you should protect the
profits and ownership of your company
Think about the following as we go through this
presentation,
• Your current profit levels
• Your home/work balance
Home
Work
• How the situations we discuss could change this balance
• How these changes would affect your lifestyle and financial security
Meet Richard
• Richard is the top sales person
in the company
• He is responsible for bringing in
50% of the company’s revenue
• He holds valuable relationships
with all of the company’s
customers
What would be the impact of Richard dying?
• Profits drop as not so many sales are made
• Relationships with key customers suffer and they start looking
elsewhere to buy
• Richard’s replacement’s salary is higher as they had to be brought in
at short notice
• Recovery is slow while Richard’s replacement gets up to speed
• The bank stops the overdraft facility because profits are falling
• Management team has to spend more time in the business
What if a key person in your business died?
• How many Richards do you have in your business?
• Who could you really not do without?
• If they were not at work, how would your business suffer?
• What would happen to the balance in your life?
Home
Work
The solution
The Company takes life cover out on
Richard … and pays for it
When Richard died, the profits dropped
Life cover paid out on Richard’s death
and replaced the lost profit
Profit £
Meet the board
•
Sue, Bill and Jo own an IT
consultancy company
•
Each has invested significant time
and money in the business and the
value of their share in it is continuing
to grow
•
If one of them were to die, the
others could carry on, although at a
reduced turnover
•
Their spouses/partners have no
interest in the business and no skills
to contribute to the business
What was the impact when Sue died?
• Sue’s partner wanted to sell Sue’s share of the business – and as
neither Bill or Jo could afford to buy them out, their share could
offered to a third party (if one could be found).
• Sue’s partner started attending board meetings and was pushing for
higher dividends to be paid out to increase his income
• At the same time as dealing with Sue’s partner, Bill and Jo had to put
more time into the business to cover the work Sue would have done
• Plus, many of the same issues we saw with Richard
What if you or one of your co-business owners died?
• How many of your co-owners’ partners would need money rather than
the share of the business?
• Could you afford to buy their share of the business?
• Would your co-owners’ partners want to be part of the business? Do
you want them to be?
• What would happen to the balance in your, or your partner’s, life?
Home
Work
The solution
SUE
SUE
DIES
LIFE COVER ON SUE
IN TRUST TO
BILL & JO
SHARES
LIFE COVER
PAID
TO TRUSTEES
SUE’S
PARTNER
SUE’S PARTNER
ASKS BILL & JO TO
BUY SUE’S SHARE
OR
BILL & JO ASK
SUE’S PARTNER
TO SELL THROUGH
A SUITABLE
AGREEMENT
TRUSTEES
PAY CASH
TO
BILL & JO
BILL & JO
BUY SUE’S
SHARE
Why is it needed?
- Likelihood of partner / director dying before 65 -
Average age of
partner / director
Number of partners / directors
30
2
27%
3
38%
4
47%
5
55%
10
80%
35
27%
37%
46%
54%
79%
40
25%
36%
44%
52%
77%
45
24%
34%
42%
49%
74%
50
22%
31%
38%
46%
70%
Source: based on Office of National Statistics Interim Life Tables for
UK Males between 2007 and 2009 as at June 2011
Meet the family man
• Ali works for LBD Ltd, a small,
successful company, and is a
high earner.
• Over the years he has built up a
substantial pension fund.
• He wants death in service
benefit through the company
and is worried about the benefits
forming part of his lifetime
allowance.
The solution
The Company takes life
• Must be an employee, including
directors.
cover out on Ali, pays for it
and places it under a
Relevant Life Policy Trust
• The business can be a limited
company, a partnership, a charity
or a sole trader.
• Cannot be used for sole traders
or equity partners who are taxed
under schedule D to provide
cover for themselves.
Life cover paid out on Ali’s
death and paid to his family • 'Salaried' partners who earn
PAYE can be covered.
The savings
Ali Ramat
a shareholding
director currently
pays £200 a
month for his
life assurance.
Cost to Ali as a Director paying personally
Monthly premium
= £200.00
Pre-tax Income to fund £200 at Income Tax rate
of 40%* and National Insurance at 2%*
= £344.83
Cost with employers National Insurance Contributions
at 13.8% on this salary
= £392.41
Gross Salary and National Insurance are
allowable deductions against Corporation Tax at 20%*
Total monthly cost to Ali and LBD Ltd Company
= £313.93
The savings
LBD Ltd pays premiums through a relevant life plan
Monthly premium
= £200.00
No employee Income Tax or National Insurance
No employer National Insurance
Relevant life policy is an allowable deduction against corporation tax at 20%*
Total Cost to LBD Ltd Company
= £160.00
Cost to Ali and LBD Ltd company paying personally
Cost to LBD Ltd Company paying through RLPT
= £313.93
= £160.00
Saving
= £ 153.93 or 49%
Do you want to do something about it?
• Please feel free to talk to me after the session
• I will call you to discuss your specific requirements over the next few
days
This presentation is based on [your firm name] interpretation of the law and HM Revenue &
Customs practice as at [5th November 2013]. While this interpretation is believed to be
correct, [your firm name] can give no guarantee in this respect.