Business Services
Running a business can be time consuming but can present financial planning or protection needs. Cardale works with many businesses, business owners, entrepreneurs and self-employed to ensure their business’s financial planning is suitable for their circumstances, and that they are taking advantage of the different products and services available to them.
Pension Contributions for Business Owners/Directors
Pension contributions made by a business for the benefit of its owners/directors can have a number of key benefits. They are classed as an allowable business expense, thereby reducing the business’s taxable profits and subsequently its Corporation Tax liability. They are a useful method of extracting profit from a business and an excellent form of employee benefit for key individuals, especially considering the tax-efficiency of a pension plan.
There are a number of pension options available to business owners/directors, including Self-Invested Personal Pensions [SIPP], Small Self-Administered Schemes [SSAS] and Personal Pensions. Deciding which is the most suitable solution depends on a number of factors, including current circumstances, objectives and retirement plans, and we are on hand to provide this type of guidance.
Corporate Investments
If there is surplus cash in a business, it is important to make sure it works as hard as possible to negate the effect inflation will have on its real value over time. It is, of course, important to ensure sufficient, immediately accessible cash resources remain within a business to fund future cash-flow, projects, R&D and so on. For excess cash, there are a number of options available with which to try to generate a return, including the following two examples:
- Corporate Investment Account – funds are invested in accordance with the owners/director’s attitude to risk across a diversified portfolio of assets.
- Gilt Portfolio – suitable for short-term time critical investments where capital preservation is of paramount importance.
Besides the obvious potential benefits of achieving capital growth, these solutions are also relatively tax efficient. We think it is vital that business owners/managers seek advice from their company accountant about the merits and potential drawbacks of any of the solutions we might recommend, and we like to work closely with a business’s other professional advisers in order to achieve the best outcomes for our clients.
Shareholder Protection
Shareholder Protection is designed to ensure continuity in the event of a shareholder’s death or serious illness. If a shareholder dies, their shares in the business might pass to their spouse/dependants. This could result in the surviving spouse/dependants having to have input into the running of a business in which they want no part.
This could also result in the surviving original shareholders having to accommodate a new business partner(s) whose vision for the company might differ significantly from theirs.
How many shares the new partner(s) own will dictate the amount of control they have over the business:
- A majority shareholder could take control of the business.
- A minority shareholder could join forces with another shareholder to exert control or influence, or sell shares to another shareholder who then gains control.
We can help put in place solutions to avoid these outcomes which would ultimately benefit all relevant parties, and ease the administrative burden at what would likely be a very difficult time for all concerned.
Director Protection
Business directors can take out a life insurance policy via their business rather than personally. This type of policy is similar to a personal policy, paying out a lump sum to chosen beneficiaries in the event of death.
The difference is that the premiums for a director’s policy can be paid by the business, and would be classed as an allowable expense for the benefit of the business, and not as a P11D benefit for the Director. It is therefore a very tax-efficient option. This type of policy is called ‘Relevant Life Insurance’, and we can source these types of policies for our clients.
Key Person Insurance (Life and Health)
The loss of a key person to a business could have a serious impact. The business could suffer a fall in sales and profits, and increased pressure might be placed on other members of staff trying to take on the key person’s workload.
Key Person Insurance allows a business to insure itself against the quantifiable financial loss it could suffer as a result of a key person in the business dying, becoming terminally ill or being diagnosed with a critical illness. It is designed to pay out a capital lump sum which could be used to replace lost profit, increase the remuneration of existing staff members and/or cover the costs of finding and hiring new personnel.
Key Person Insurance is a life assurance and/or critical illness cover policy taken out to cover the life of a key person within a business. The policy is paid for and owned by the business, so any pay-out is payable to the business and not the employee or their dependants.
Employee Protection (Group Life Schemes etc)
Group life cover, also known as death in service, is a type of term insurance that an employer may offer their staff as a benefit of their employment contract. It is set up by the employer to protect staff whilst they are employed by the business.
If an employee dies, death in service benefit pays out a lump sum to their family or next of kin. The lump sum is usually based on a multiple of salary, for example two, three, or four-times salary at the point of death.
There are two different Group Life Trusts available for these types of schemes, ‘registered’ and ‘excepted’, and we can provide advice and guidance on which would be most suitable for your business.
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