A Relevant Life Plan is a type of individual life cover policy tailored for employers seeking to provide tax-efficient death-in-service benefits to their employees outside of a registered group life scheme. Additionally, it’s utilised by high-earning employees who wish to keep their death-in-service benefits separate from their pension funds, particularly if they have substantial savings nearing their lifetime allowance.

Here are some key tax advantages associated with Relevant Life Plans:

1. Exemption from Annual Pension Allowance: The payments made under Relevant Life Plans do not count towards the employee’s annual pension allowance, providing tax efficiency and flexibility in pension planning.
2. Income Tax Exemption on Premiums: Premiums paid under Relevant Life Plans are typically not subject to income tax, as they are not considered as a benefit in kind.
3. Tax Deductible Premiums for Employers: Employers can treat the premiums as allowable expenses when calculating their tax liability, provided they meet the criteria under the ‘wholly and exclusively’ rules.
4. Inheritance Tax Exemption: In most cases, the benefits from Relevant Life Plans are paid free of inheritance tax. This is because the policy is written in trust, and the benefits are distributed through the trust, offering tax efficiency and asset protection.
5. Policy Ownership and Trust Arrangement: The Relevant Life Plan is owned by the employer, who also pays the premiums. Typically, the life assured is a key person within the business. The policy is written in trust for the dependents of the life assured, ensuring that the benefits are directed to the intended recipients in a tax-efficient manner.

By leveraging the tax advantages of Relevant Life Plans, employers can provide valuable death-in-service benefits to their employees while optimising tax efficiency for both the business and the individuals covered under the policy.

Indeed, Relevant Life plans offer several additional tax advantages beyond those previously mentioned:

1. Exemption from Annual Pension Allowance: Contributions made towards Relevant Life plans do not count towards the employee’s annual pension allowance. This provides individuals with an opportunity to benefit from additional life cover without impacting their pension allowances.
2. Income Tax Exemption on Premiums: Premiums paid for Relevant Life plans are typically not subject to income tax for the employee. Since they are not considered as a benefit in kind, they offer tax efficiency and savings for the individual.
3. Tax Deductible Premiums for Employers: Employers can treat the premiums paid for Relevant Life plans as allowable expenses when calculating their tax liability. This can result in tax savings for the business, provided the premiums meet the criteria under the ‘wholly and exclusively’ rules set by the local tax authority.
4. Inheritance Tax Exemption: In most cases, the benefits received from Relevant Life plans are exempt from inheritance tax. By setting up the policy within a trust structure, the benefits are distributed to beneficiaries tax-free, providing added financial security for the dependents of the life assured.
5. Business Ownership and Trust Arrangement: Relevant Life plans are typically owned by the business, with the premiums paid by the employer. This arrangement ensures that the benefits are directed to the dependents of the life assured, offering financial protection and peace of mind for loved ones.

These tax advantages make Relevant Life plans an attractive option for employers and high-earning individuals seeking tax-efficient ways to provide life cover benefits and protect their loved ones’ financial future.