With experience of advising Owner Managed Businesses and working closely with Accountants to ensure the business you've worked very hard to build, is protected in the right way.
Some key aspects we can discuss are:
Business Protection
As part of the benefit package you may want to offer extra security to the existing work-force which is something we can help arrange and assist with as part of any business review.
- Key Person Insurance - If a key employee passed away or had a long term serious illness you lose their expertise and commercial value. A Key Person Insurance policy will pay out a lump sum to the business to help cover the loss of revenue. This can then be used to help recruit and train a replacement without putting added pressure on the business.
- Shareholder Protection - This is applicable for those with more than one shareholder. In the event of death the shares pass to the intended beneficiaries, who may not share the same passion and vision for the company, or they could even sell the shares to a third party where the existing shareholders have no control over this.
Without protection this increases the risk of the business and the longer term success of it. A Shareholder Protection contract protects all parties involved. It providers a sum of money to the surviving shareholders to purchase the deceased shareholders equity, but also ensures the control of the company remains with the surviving owners. This also keeps it cleaner for the beneficiary, who then doesn't have the worry or stress of what to do with the company or selling the shares they've inherited.
This offers life insurance to employees and directors of the business which are treated as an expense against the company and not as a benefit in kind for the individual. These only tend to qualify for tax benefits when there's a link between employer and employee with a maximum term to age 75. The good news is that many providers offer the opportunity to port these, whether it's to another firm or transferring into your own name personally, meaning there's further features and options which are beneficial.
- Group Life / Critical Illness or Income Protection
Investment Options
- Many firms tend to build up good cash reserves but are not looking to extract funds straight away. Taking this into account we can discuss the options of making these work better, whether that's via corporate investments or a form of cash management solution to ensure you maintain the best interest rates in the market. Often business accounts have a low interest rate and with significant sums it can make a big difference keeping on top of this, which is something we'd look to assist with.
Pensions & Extracting Funds From The Business & Commercial Property
- Many directors and owners want to extract funds tax efficiently and the best way of doing this, apart from the general remuneration structure of salary vs dividends, is via pension contributions.
- With pension planning you have the opportunity to carry forward from the 3 previous tax years on any unused allowances so this provides a great way or extracting funds from the business.
- When making these contributions we strongly advise you seek advice because there are complex rules around the available allowances and tapering, which can be costly if not done right.
- Commercial Property can also be held in a pension and is a great piece of planning if the business you own has the opportunity to buy the current premises.
- If you hold enough funds in the pension you can buy the property outright, or you may need to borrow further funds to assist with this if there's a shortfall, which can be done via a mortgage.
- The benefit is that instead of the company paying rent to another landlord, you pay the rent to yourself in the pension.
- This helps build the pension up and also means you can continue contributing as you normally would, under the available pension annual allowances.
- You can indeed buy any commercial property, it doesn’t have to be the commercial premises you are working from.
- Group Pension Schemes - There's a huge number of companies still operating under a standard Nest or People's Pension Scheme, which is expensive and limited under the available investment options it has. It's always important to review any current structure and ensure the staff are benefitting from a modern day scheme. As part of this we're happy to provide a review and advise the company/employees on the best option. As part of this we can prepare a pension session to the company to educate staff further if required.
Succession Planning
- We can work with any business advisers or corporate finance specialist to help with the planning of this.
- Whether it's a trade sale or Management Buy Out, we're can assist with cashflow modelling to help those exiting understand if the offer available is enough to meet their desired lifestyle.
- If we're involved early enough we can also assist by extracting funds appropriately into pensions and prior to the agreed sale. Following on from this and for continuity, we're also on hand to help the new owners ensure they have the right levels of protection and financial instruments to assist as they takeover.
Group Life /Critical Illness or Income Protection
The main benefit employers offer is Group Life or Death in Service which can be a predetermined amount, such as 4x salary and payable on death. The cost of this compared to Group Critical Illness or Income Protection is usually much lower but provides an important benefit for the employees. Group schemes can be setup for as little as 2 employees which means there’s no individual underwriting requirements, so an employee who struggles to obtain cover or if they’ve been declined in the past will see this as a huge benefit.
Group Critical Illness will offer employees a lump sum on diagnosis of a specific critical illness covered in the terms of the policy and income protection can provide ongoing cover for an individual if they’re unable to work. Employers offering a host of employee benefits typically see better retention of staff, due to the benefit package on offer and the security it offers them and their family.
Investment Risk Warnings
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Past performance is not a reliable indicator of future performance and should not be relied upon.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. The Financial Conduct Authority does not regulate tax planning.
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