Can you claim insurance costs through your business?

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If you own a limited company, or you are self-employed, then you will usually have insurance cover in place.  This article will look at which business insurance expenses can be claimed against your company’s profits.

If you want to claim back costs of insurance through your business then then the policy you are claiming for must be for businesses purposes only.  For example, a life insurance policy could not be claimed as a business expense as is doesn’t serve a business purpose.  A policy that covers against injuries to employees, would, on the other hand be tax deductible, as it is clearly a business expense.

Business Insurances

Below is a list of types of business insurance that can be claimed as company expenses:

  • Public liability
  • Employer’s liability
  • Legal expenses cover
  • Tax investigation insurance
  • Professional indemnity insurance
  • Motor insurance (for company vehicles)
  • Office building and contents cover
  • Equipment Cover
  • Business disruption cover

Key Person Insurance

Key person insurance cover insures a company against a loss in profits should a key team member or director die.

If a claim was made through this policy and the proceeds paid to the company, the cover may not be tax deductible.  This is because the benefits would pass to the family of the deceased, providing a personal benefit as well as a business one.

Relevant Life Policy

There is a new ‘key person’ policy called ‘relevant life’.  This uses a trust to help SMEs provide tax efficient death in service for employees including directors. Within this plan, premiums are an allowable expense, there are no benefit in kind considerations for the employee and most importantly of all, in the event of a claim the proceeds are tax free too.

Cover allowance is based on earnings but the ‘relevant life’ policy is a far more tax efficient way of protecting family members of an entrepreneur than mainstream ‘key person’ policies.

You must take care when taking out any ‘key person’ policy.  It is best to speak to an adviser to make sure the company and the recipients of any insurance payout, are not going to be heavily taxed.

Permanent Health Insurance

In the unfortunate event that you are unfit to work, business owners are responsible for protecting themselves financially.  Income protection cover you in this instance.

You can pay for a Permanent Health Insurance (PHI) policy via your limited company, or out of your own income.

PHI contributions to a business scheme are allowable against tax, however, if you claim against a business PHI policy, you will have to pay income tax and, in some cases, National Insurance Contributions on the payments.

If you fund an income protection policy personally, your contributions will be made out of post-tax income, but any funds you subsequently receive as a result of a claim would not be taxable.

It’s advisable to speak to a professional before committing to any policies, to make sure you are aware of all of the benefit levels and tax implications.