Business Protection Customer Seminar Zurich accepts no responsibility for ensuring that this presentation meets the requirements of financial services legislation covering financial promotions. You will need to satisfy yourself that the content meets the relevant requirements.The design of this presentation has been left blank so you can add your own branding to the slides.
Protecting your business What do you protect? ü ü ü ? ? Property Profits Liability Vehicles 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 • How the situations we discuss could change this balance • How these changes would affect your lifestyle and financial security Work Home
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? Work Home
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? Work Home
TRUSTEES PAY CASH TO BILL & JO SHARES LIFE COVER PAID TO TRUSTEES SUE’S PARTNER ASKS BILL & JO TO BUY SUE’S SHARE OR BILL & JO ASK SUE’S PARTNER TO SELL THROUGH A SUITABLE AGREEMENT SUE’S PARTNER BILL & JO BUY SUE’S SHARE The solution SUE SUE DIES LIFE COVER ON SUE IN TRUST TO BILL & JO
Why is it needed? - Likelihood of partner / director dying before 65 - Number of partners / directors Average age of partner / director 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 cover out on Ali, pays for it and places it under a Relevant Life Policy Trust • Must be an employee, including directors. • 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. • 'Salaried' partners who earn PAYE can be covered. Life cover paid out on Ali’s death and paid to his family
The savings 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 Ali Ramat a shareholding director currently pays £200 a month for his life assurance.
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 = £313.93 Cost to LBD Ltd Company paying through RLPT = £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.