Key Man Assurance - What would happen to your business if . . .

What would happen to your business if.... 

As a business owner you will have worked hard to build your business over the years and whilst you may have established and continue to maintain suitable cover for tangible assets such the business premises. The most important assets within your business often remain uninsured, that is, those individuals who drive the business forward and produce the income that makes the business viable. 

Business is often built upon individuals and the need to establish life cover for key individuals is a common over-sight, often seen as a luxurious extra for the well-off rather than a must have to protect the business. We see it as the latter, an essential in protecting the business revenue streams against the worst scenarios. Cover can be set at a level so to cover lost revenue, recruitment and training costs and can be established for a yearly review or for longer periods, such as until the life assured retires. Which ever term opted for or the amount insured, for a relatively small monthly outlay (that could attract tax relief) your business continuity is protected and if the worst case happens the business can continue. 

To discuss your options please call (01932) 830664.      

Fixed Protection for Pensions 2014

Within the last fortnight, HMRC has finally released the application form (APSS228) for individuals who wish to apply online for Fixed Protection 2014 (FP2014).

However, applying for FP2014 is the easy bit. Deciding upon whether you need to, or should, apply for protection is more complex.

First of all, why has FP2014 been introduced? For the simple reason that the pension Lifetime Allowance reduces from £1.5m to £1.25m on 6 April 2014. Any pension savings above this level will be heavily taxed when benefits are taken.

Who may be affected by this? Any person who did not apply for Enhanced or Primary protection before 6 April 2009, and believes the total value of their pension savings will exceed £1.25m when they take benefits on after 6 April 2014.

Warning 1: Before applying for FP2014, you need to know that this protection will be lost if any of the following events occur:

· You start a new pension arrangement after 5 April 2104, other than to accept a transfer of existing pension rights;

· You (or your employer) make further pension contributions to a ‘defined contribution’ arrangement as your Annual Allowance will reduce to zero;

·  You accrue further benefits in a ‘defined benefit’ arrangement.

We can see therefore that the decision about whether to apply for protection is certainly not straightforward, particularly where an individual is many years from drawing benefits and wishes to continue making contributions, or accrue benefits.

Difficult calculations are often required to arrive at an informed position from which to make a decision. We can help you.

Warning 2: If you are employed, and your employer automatically enrols you into a pension scheme, you have 1 month to opt out. If you fail to do so, FP2014 will be lost.

Watch this space for news of Individual Protection 2014. The government will be announcing the final details of IP2014 later this year.

IP2014 is expected to be available for individuals who have accumulated pension savings of at least £1.25m by 5 April 2014, and wish to continuing making pension contributions/accruing benefits.  

AIM shares and ISAs

The new ISA rules allow AIM shares to be held in an ISA. Thus many investors could be looking to transfer their AIM shares into an ISA.

Certain AIM shares benefit from Business Property Relief (BPR). Once shares have been held by an investor for a minimum of two years they are exempt from inheritance tax. Investors holding these shares in their ISA for the two-year qualifying period should benefit from virtually no taxes while they hold the share, and no potential inheritance tax liability.

If there is a transfer of AIM shares into an ISA and the shares have already been held for two years this inheritance tax benefit will be retained within the ISA  without them needing to be held for a further two years.

Please remember the value of tax shelters will depend on individual circumstances, and tax rules can change over time.

For further information please contact Director of Financial Planning Cliff Pocock at Ward Williams Financial Services Limited.