What’s The Difference Between Keyman Insurance & Shareholder Protection?

Keyman Insurance vs Shareholder Protection Insurance

To give you a better idea of the differences between Shareholder Protection and Keyman Insurance, we’ve put together a table of key comparison points.

How Are They Both Taxed?

Where the policies are covering different needs the tax position is different and is dependant upon how they are set-up.

Taxation of Keyman Insurance

How keyman insurance policies are taxed are primarily dependant on who is covered by the policy and whether they have any interest in the business.

Covering Shareholders

Where the a policy benefits anyone other than the business, premiums are rarely a tax-deductible business expense. HMRC also usually considers premiums a taxable trading receipt

Covering Employees

Premiums are typically a tax-deductible business expense as HMRC generally regards such policies as for the benefit of the business. However, the benefit will be a trading receipt subject to tax.

Covering Business Loans

Here the policy is for the benefit of a lender, not the business. Premiums are therefore not usually tax deductible. However, as the payout is to rebalance the company’s capital account, HMRC won’t typically tax it as a trading receipt.

Taxation of Shareholder Protection

There are various ways shareholder protection can be structured, the taxation of the policy depends on who owns the policy and pays the premiums.

Life of Another

Each shareholder pays for a policy on the life of the other shareholders. They pay using post-tax income, so there’s no tax relief. The shareholders receive the payout and so there’s typically no tax on it for the company.

Own Life Under Business Trust

Each shareholder buys cover on their own life in trust for the other shareholders. Most of the time the company pays, with premiums typically a business expense. However, shareholders pay tax on premiums as they’re a benefit in kind.

Company Share Purchase

The company buys a policy on the life of each shareholder and gets the payout, using it to buy back and cancel the absent shareholder’s shares. The proportionate shareholding and the value of the remaining shareholders’ stakes therefore rises.

Premiums are not typically a business expense as the policy benefits shareholders, who gain financially from a payout.

Compare Business Protection Quotes & Get Expert Advice

Whatever your needs are as a company, we have a team of business protection experts who are on hand to help.

We compare Keyman Insurance quotes and Shareholder Protection Insurance quotes from every major UK insurer to find you the best deal.

Why Speak to Us?

We started Drewberry™ because we were tired of being treated like a number.

We know that our clients give so much to their businesses. They therefore deserve first class service when it comes protecting that business and their interest in it. Here are just a few reasons why it makes sense to talk to us:

• There is no fee for our service
• We are award winning 🏆 independent insurance advisers who work with all the leading UK insurers
• You’ll speak to a dedicated expert from start to finish
• We are very proud of the 3900 and growing independent client reviews rating us at 4.92 / 5
• Claims support when you need it most.
• We are authorised and regulated by the Financial Conduct Authority. You can find us on the financial services register here 🧐

For help and fee-free advice on which business protection is best to cover your business, don’t hesitate to get in touch. You can pop us a call on 02084327333 or drop us an email at help@drewberry.co.uk.