Over the years that we have been advising PSCs – nearly 30 – we’ve dealt with similar questions on a number of times, so here are some of the questions that come up regularly and our thoughts.
This are largely written from the PSC users perspective. The content will be of interest to many small companies so don’t take the PSC aspect too resistivity.
This guide is part of a series. This is the index:
- Index to our PSC Guidance
- Whitefield PSC services
- PSC Basics – including set up and closure
- IR35 & Related Issues
- Tax and VAT for a PSC – including Corporation Tax, Income Tax, NI, PAYE and VAT
- Expenses for a PSC
- Accounting for a PSC – including bookkeeping, invoicing, receipts, dividend administration
- Practical Issues for a PSC – some of the questions and issues our clients raise regularly
- Whitefield PSC Spreadsheet
- Employers Liability Insurance
- Legal Obligations for your Company
- Loans between a Company and its Directors / Shareholders
- Business Terms and Late Payment
- Employing Someone to Assist you, including a Spouse
- Insurance for your Business (PI, PL etc)
- Working Abroad with your own Company
- Running another Business or Hobby though your Company
- Investing through your Company
- Pension and Assurance Provision
A frequent question is do I need Employers Liability insurance if I only employ family members?
Sole traders and Partnerships
- Sole traders and Partners are not employees in their own right, so working by themselves don’t need Employers Liability cover.
- However if others are employed, including some sub contractors (typically labour only) then Employers Liability is needed.
- What about family members? The guidance confirms an exemption for family businesses:
- ie if all of your employees are closely related to you (as husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister). However, this exemption does not apply to family businesses which are incorporated as limited companies;
- Another exemption applies here:
- companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company
- This would exempt a situation where
- (i) a controlling director (50% shares or more of shares) is the only employee; and
- (ii) where two people work for the company and have 50% of the shares each.
- Not exempted is a family situation where: all the shares belong to one person, but their spouse / family member works for the business either without shares or with less than 50%. This means Employers Liability cover is required in many situations where one partner runs a business full time, and another assists in it part time.
Company Secretaries and Directors
- There is no specific exemption in the HSE guidance for Company Secretaries and Directors – however someone who is paid a fee for an office would probably not qualify as a “worker” for the purposes of Employers Liability, and to that end a fee paid to a non executive Company Secretary or Director would probably not, by itself create an obligation to insure, even if its necessary to apply PAYE to this sum.
There are a myriad of legal obligations on businesses, and this isn’t a definitive list, however it covers the main ones:
- Keeping accounting records – this stems both from the Companies Act and tax law. Companies Act requires that you know the financial position of your company at any given time; although this doesn’t have to be precise, it should be an idea of solvency and retained profit for dividend. Obligations under tax law are to keep records sufficient to prepare accounts and returns.
- Companies Act and Insolvency Act
- Not to trade whilst insolvent
- Run the company in accordance with the Memorandum and Articles of Association
- Not to act against the interests of the company and/or minority shareholders
- Include company name and number on correspondence, letterheads, invoices and on your website (e-commerce laws)
- Health and Safety Law including
- Lability insurances such as public liability for premises
- Fire safety
- Food safety
- Risk assessments
- Employment Law including:
- Minimum wage
- Workplace pensions
- Employment contracts and statement of particulars
- No unauthorised deductions from pay
- Operate PAYE
- Consider employment status (employed or self employed) for workers and contractors
- Employers liability insurance
- Equality and diversity
- Planning Law where you use business premises – generally this doesn’t effect an office at home, so long as the “character” of the home remains unchanged.
- Consumer Protection if you sell direct to the public, including
- Displaying prices
- Unfair contract terms
- Product liability
- Sale of Goods Act
- Trade descriptions
- Data Protection including
- Registering with Information Commissioner
- Web and server security
- Meeting security requirements of credit card companies if you accept cards for business
- GDPR and DPA
- Environmental Law including controlled substances and waste disposal
- Equality Laws including non discrimination and disability access
- Motoring Law including making sure drivers are insured if they use their own car for business, vehicles are safe and maintained
- Website Laws including contact and place of business details, and details of PI insurances in some sectors
- Industry and Sector Specific regulation
Something you hear about sometimes is the concept of directors – or shareholders – loans.
First, to clarify, this could refer to separate things. It could refer to the ongoing balance of money loaned to a company by its directors/shareholders – in essence capital in the business, or it could refer to money lent by the company to its shareholders / officers.
Money Lent to a Company
Lending money to a company is relatively uncontroversial.
This could be:
- Money expressly introduced to the company as a lump sum
- Expenses incurred for the company and not reclaimed
- Assets introduced to a company
- Undrawn dividend
There are no legal restrictions on lending money to a company, and no adverse tax issues for the company or the director / shareholder.
A few points to watch though:
- charging interest for money lent to a company ~ this can be done, but there are tax complications – best avoided unless necessary. Any interest is normally tax neutral in terms of being an allowable expense for the company and chargeable to tax for the lender.
- if you lend money to a company it can end up being pooled with a general balance of directors current account, and set off against other transactions with the directors / shareholders – its quite possible to lose sight of the balance or indeed to find a loan being eroded over years. It is sometimes necessary to keep a loan expressly separate for this reason.
- Anti Money Laundering (AML) regulations are onerous, and strictly monitored. if you lend/give money to your company it is is important that you keep a detailed record of the transaction(s) as you may at various times be asked to provide evidence of (a) the source of the funds loaned/given to the company (eg copies of personal bank statements (b) the origin of such funds (eg other personal income, such as a 2nd job, rental income etc/inherited wealth/accumulated savings etc.
Borrowing From Your Company
Borrowing money from a company is often suggested as an alternative to taking salary or dividend, the attraction being the avoidance of personal tax. Alas it’s not that simple.
First, legality – until the enactment of Companies Act 2006 loans to directors/shareholders were generally illegal – although the only party interested in enforcing that was generally the shareholders themselves. That has now changed, and loans to directors/shareholders is now legal, although loans over £10,000 should be approved by the shareholders – normally one and the same of course.
In terms of tax, a special charge exists under s 455 CTA 2010, sometimes known as Advance Corporation Tax. This dictates that if a loan is made to a director / shareholder then a tax payment equal to 32.5% of the loan value needs to be paid to HMRC if the loan is still outstanding 9 months after the year end – this tax is repaid to the company 9 months after the accounting year in which the loan is repaid.
EG, assume a company has a 31 March 2021 year end:
- a loan of £10,000 is made to a shareholder on 1 June 2020, and repaid 1 March 2021. As it’s not outstanding at the year end, no s455 tax is due.
- a loan of £10,000 is made to a shareholder on 1 June 2020, repaid 1 May 2022 – as this is outstanding 9 months after the year end, s455 tax of £3,250 is due on 1 January 2022 (along with the Company’s normal Corporation Tax payment). This tax is, all other things being equal, repayable (in practice offset to Corporation Tax otherwise due) 1 January 2024, 9 months after the end of the financial year of release.
- a dividend of £10,000 instead of the loan would incur extra tax at dividend rates
Note that HMRC are wise to “recycling” of lending, eg repaying a loan a few days before the financial year end and re lending it a few days later.
Generally the effect of the above is that a short term loan causes no tax issue, but if the lending goes on beyond 9 months after the financial year end, or is recycled, then the s455 tax charge is effected.
A further complication relates to loans over £10,000 where a personal Benefit in Kind (BIK) charge for Income Tax and NI applies on notional interest unless interest is charged by the company and physically paid to the company by the director / shareholder. The “official rate” of interest which is used to both work out the BIK, and as a benchmark for exemption if interest is charged and paid, can be viewed at:
The BIK applies separately from the s455 liability and the provisions re 9 months after financial year end, etc,
Generally the effect of the BIK is to make many loans uneconomic.
Finally, it should be borne in mind that a so called “overdrawn” directors account – where money has been drawn from a company in excess of the salary / dividend / expenses available – counts as borrowing and the above regime applies. It is important to make sure that monies taken from a company, in particular interim dividends, are covered by distributable profit available, and clearly described as dividends, ideally backed up by minutes.
Late payment is a worry for any business. Here are a few practical pointers.
First, written terms of business with your customer is essential.
Here are some things you may want to look for in an agreement:
- Employment status – if you are working though a PSC state this. If you are a Sole Trader state Self Employed
- The tasks to be done
- Place and time the tasks are to be carried out
- Payment rate
- Payment and invoicing terms
- Any special arrangements or requirements
Alternatively you may operate with a more wider range supply agreement or set of terms of business. Get help from a solicitor to make sure they are robust and enforceable.
As a minimum include a clause on your invoices with your payment terms and the wording “Interest and Late Payment Charges will be applied under Late Payment of Commercial Debts (Interest) Act 1988 as amended by EC Directive 2000/35/EC
In many cases contracts are imposed on business, eg
- Freelancers/contractors working through agencies / direct contracts
- Small businesses dealing with larger ones or public entities
If this is the case payment should be covered in there – be aware that courts may strike down terms if they are manifestly unfair and not freely negotiated.
What if that says something different to your invoice? Well normally, a contract imposed by a larger customer will have a clause saying their contract is the extent of the agreement between the businesses. Thats normally definitive, although the “rough justice” approach of the Small Claims Court may over turn that if it was unfair and/or bargaining power was unequal. As well as payment arrangements, interest arrangements in the event of late payment may also be stated.
If you are responsible for setting contract terms then, amongst other things, make sure payment time-scales and late payment provision are clearly set out.
Late Payment Rules
Suppose the terms are not clearly agreed one way or another? Or payment is outside of terms?
Well, here legislation helps, specifically Late Payment of Commercial Debts (Interest) Act 1988 as amended by EC Directive 2000/35/EC. See the simple guide to this by HM Government.
These are set under Late Payment of Commercial Debts (Interest) Act 1988 as amended by EC Directive 2000/35/EC, and apply in the absence of any other contractual agreement.
These rules stipulate the following where there is no agreement to the contrary:
- A payment is late after 30 days
- Late payment (after thirty days or whatever else is agreed) is subject to interest at 8% over base (simple daily rate not compound)
- Credit charges can be added to the debt at prescribed rates:
- Debts of up to £999.99 – £40
- Debts £1,000 to £9,999.99 – £70
- Debts over £10,000 – £100
These are useful provisions as only court costs, and not legal fees, can be recovered in a Small Claims Court action.
What to do if you are not paid
Depending on the size of the debt, and the situation your customer is in, you may want to engage the services of a solicitor who specialises in debt recovery. You could take this on yourself – a Small Claims Court Summons is relatively easy to prepare and serve, but there are pitfalls, and even if your claim is successful in the County Court, recovery of the debt under a judgement is still left for you to deal with, so a court judgement does not guarantee payment.
If you intend to pursue the outstanding debt through legal proceedings, it is probably going to be worthwhile engaging a professional to do this for you – however the costs of this cannot be recovered in the event of a win (court costs can, not legal fees). Keep a record of correspondence relating to the unpaid debt – statements, reminders, solicitor’s letters etc. These will need to be produced if HMRC wishes to review the circumstances of your bad debt claim in the event that your efforts to recover payment are unsuccessful.
It is possible to do a simple Small Claims Court claim yourself – see Money Claim Online, HM Court Services Official Online Service – but you do need to be spot on with your paperwork as there tends to be a “rough justice” approach.
Before you embark on any costly legal proceedings, try to ascertain the current trading position of the defaulting customer; are they subject to insolvency/bankruptcy proceedings for example? If so, it will probably be pointless pursuing any unpaid debts, as the company’s assets will be frozen. In due course, you should be contacted by the insolvency practitioner assigned to handle the case, once they have determined who the creditors are. In most cases there will be insufficient funds to pay out to anyone except the preferred creditors (Banks, HMRC, unpaid staff wages), so the chances are you will be a long way down in the pecking order. However, written confirmation from the insolvency firm is sufficient for bad debt write off purposes.
What if the unrecoverable debt puts your own business in financial trouble?
This can be a real headache for an owner managed business. Even though you have uncollected debts, there are still the usual day to day bills to pay, including taxes. During the period when you have been building up a sizeable total of unpaid sales invoices, you may have been forced to use company tax savings to fund your own salary and dividend withdrawals, with the intention of plugging the hole once the payments came in. The result: insufficient funds to pay the company’s tax and vat debts.
The first rule is don’t bury your head in the sand, and don’t put action off until it becomes an even bigger problem. If you cannot see an appropriate way out of the company’s financial situation, and wish to get your company back to a solvent position, it may be useful to speak to an Insolvency Practitioner. Don’t be alarmed by the title, they are not simply in the business of winding companies up, they also have a role in assisting businesses to find a way back from the brink. Insolvency Practitioners can advise and assist you in discussions with HMRC over unpaid taxes, and offer ideas to help you get your company back on its feet.
Bad Debt Relief for Tax Purposes
Under current HMRC CT rules, a deduction for a bad or doubtful debt can be made against the profits in the year in which the debt becomes bad or doubtful. Efforts to recover the debt must have been made, and should be evidenced.
Once the bad or doubtful debt has been established, a deduction, by way of a write off, can be made in the company accounts. This should be done in the period in which the decision to write off is taken. Any subsequent debt recovery must be included in the accounting period in which it is received. The bad debt is shown as an expense in the profit and loss account, but the original sale value will also be included in sales income, in the year in which the services were supplied. The net effect is a sales non event, rather than a tax deductible expense. HMRC may wish to enquire into the circumstances of a bad debt write off, especially if it is sizeable, so it is better to be forearmed.
Bad Debt Relief for VAT Purposes
If you sell something to a customer but the customer never pays you, you can reclaim the VAT you charged and paid to HMRC. HMRC calls this ‘bad debt relief’.
The recovery rules vary according to which VAT scheme you use:
- If you are using the VAT “cash accounting” scheme and are applying normal vat (not flat rate) there should be no VAT bad debt relief to consider, as you wont actually be out of pocket in terms of VAT
- If you are using the invoice basis of VAT accounting you can adjust your vat return to secure a refund. To do this:
- The debt must be more than six months old and, and less then four years and six months old
- You add the amount of VAT you are reclaiming to the amount of VAT you are reclaiming on your purchases (input tax) and put the total figure in Box 4 of your VAT Return.
- To work out how much bad debt relief you can claim on a VAT inclusive balance, you need to apply the appropriate VAT fraction to the unpaid amount.
- Businesses using the Flat Rate Scheme for VAT are subject to special rules, and are eligible for bad debt relief if:
- you have not been paid by your customer and it has been at least six months since you made the supplies
- you have not accounted for and paid tax on the supply
- you have written off the debt in your accounts
- If you meet all these conditions, your claim will be for the full amount of the VAT you charged your customer (not the Flat Rate amount) and should be included in box 4 of the next VAT return.
You may need to employ others to help you. What are the implications?
Employed or Self Employed?
The first thing is to check whether your assistance is employed of self employed. See Employment Status
If your assistance is employed then:
- You must stop Tax and NI under PAYE (we can help you with this)
- You will be liable for employment protection issues, eg holiday pay, sick pay, unfair dismissal, redundancy costs
- You will need comply with Auto Enrolment
- You must give your employee a contract or statement of particulars of employment, and set out a disciplinary & grievance procedure
If your assistance is self employed:
- It is a good idea to have a contract in place to confirm this
- It is a good idea to obtain and retain evidence of self employed status (the contract helps this)
- In the construction industry you would need to operate CIS (Construction Industry Tax Scheme)
Either way, employers liability insurance is recommended. See Employers Liability Insurance
Employing a spouse is often practical and convenient. The same rules apply, although as a family member National Minimum Wage, Employers Liability and Auto Enrolment may not be applicable in some circumstances – take advice.
If your spouse doesn’t work elsewhere we suggest a salary up to the personal allowance threshold.
HMRC can challenge spouse wages if they are excessive. Keep a note of what your spouse does for the business, and consider making them a director or partner to show they carry extra responsibilities.
There are various insurances to be considered for a Service Company:
PI provides financial protection for your company and is designed to meet the cost of defending claims made against you, including damages that may become payable. Claims can occur where a client suffers a financial loss as a result of alleged mistakes or omissions on your part, or you may even be sued by a client who is merely dissatisfied, but has no valid claim, leading to substantial legal costs and time away from contracts.
PL protects you against your legal liability where you accidentally cause damage or loss to someone else’s property, or if you accidentally cause injury to someone whilst working at a clients premises
This insurance is arranged to protect employers against claims for injury or illness brought by employees. Employers’ Liability (Compulsory Insurance) Act 1998 requires that employers maintain cover to a minimum of £5,000,000 in respect of such claims. Although it is a statutory requirement, the requirement is waived where the company’s only employee is the sole director (the precise wording is “companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company” – see HSE guidance )
See the section above on Employers Liability Insurance
Home Office / Equipment Insurance
This covers equipment, used either on site or in home office. Sometimes equipment may be covered under household insurance, but you need to check this, and maybe get it in writing, before assuming so.
Fee Protection Service
IR35 and taxes in general mean that PSCs and other Small Businesses have a higher than usual chance of attention from HMRC. Fee Protection Service protects you against the Professional Fees in defending such action. We offer a Professional Fee Protection Scheme to our clients
Medical & Sickness Insurance
Policies of this nature can offer you protection if you are ill and unable to work, either short term or long term. See the separate section on Pension or insurance provision.
You can use a UK company to work abroad although, not surprisingly, it complicates the tax and NI issues and in many cases its simpler to arrange a local solution in the guest country.
The following is an overview of the tax system for working abroad, although advice should be taken for each individual set of circumstances.
Generally, if you are working abroad for less than a full tax year (6 April to 5 April) then your UK tax and NI position remains unchanged – this would cover a short engagement abroad.
If you are working abroad for more than a year then the outline position is below.
UK Corporation Tax
Your company normally remains UK resident and will be subject to UK Corporation Tax. If you establish permanent links to a host country, your company may be forced to assume tax residence there.
UK Income Tax
If you are working abroad for less than a tax year then Income Tax operates as normal on salary and dividends.
If you work abroad for at least a complete tax year (5 April to 6 April) then you can qualify for non UK residence status. The tax benefits of non-residence start from the day you go abroad so long as the non residence status is actually achieved. Eg if you go abroad on 30 April 2020 and are still working abroad at 6 April 2022 then on 6 April 2022 your non residence status is achieved, backdated to 30 April 2020. This is called “split year treatment”, and where you go abroad mid year the number of days you can spend in the UK is restricted, broadly to a proportion of 91 days / full year (but check the table HMRC provide in their guidance). In 2013, there were significant changes by HMRC to its guidance on Residence and Non Residence, and the old days based approach to non residence is now rule based – personalised advice is needed.
Once you have qualified as non-resident, salary from your UK company will be free of UK Income Tax. Dividends from your company will still be taxable, as will UK sources of investment income such as bank interest, share dividends, rent received, etc; in such circumstances moving investments offshore, eg to the Channel Islands may be worthwhile. Non residence status will affect your capacity to utilise privileged UK savings products such as pensions and ISAs.
Slightly different rules apply if you are leaving the UK for something other than full time work abroad.
UK National Insurance
The UK has reciprocal arrangements with EEC countries and bi lateral agreements with many other countries. The effect of this is that you normally remain within the UK NI net for at least twelve months following your starting to work abroad – clearly this will be developing with Brexit from January 2021, and after then its likely that for EU contracts you will come into local NI earlier.
If your UK company is invoicing a foreign company or agency then your VAT status and reporting requirements may change. This will depend on
- The type of goods or services you supply
- Where you supply them
Brexit has of course complicated VAT to a degree.
UK Capital Gains Tax
There are special rules for UK Capital Gains Tax whilst you are abroad; liability to UK CGT continues to accrue for up to five years after departure, and can be charged if you move back within 5 years. Specialist advice tailored to your circumstances will be needed.
Overseas Jurisdictions Taxation – Guest Country
If you are working abroad then you may find it necessary to register with local taxation authorities and pay local taxes. The UK has double taxation agreements with most other countries which determine how a national from one country is taxed whilst living or working in the other country, and these need to be considered on a case by case basis – as a rule of thumb a local tax liability may arise once you have been present in the host country for three months or more.
Compared to much of the world UK has a relatively low tax burden, and many people working abroad will wish to engineer their circumstances so that they are considered to be UK resident under the terms of the relevant double taxation agreement. The requirements of meeting the registration requirement in an overseas country will have to be considered on a case by case basis.
- A view needs to be taken on how long the overseas work will last.
- No decisions on UK taxation should be considered in isolation – the host counties tax must be considered as well.
- Personalised advice is needed if you are to work abroad.
In principle another business or hobby business can be run through your existing company, although if it is more of a hobby than a business then care will need to be taken to show that it is being run on a commercial basis; for this reason “sponsorship” schemes, eg horses or car racing, normally fail and we recommend people not to mix business and pleasure, however tempting the tax relief is.
Income caught under IR35 is ring fenced and cannot be used to offset a loss or expenses incurred on another business.
If you are starting another business though, here are a few things to think about:
- Would it be better in another entity, to give it the benefit of a VAT registration threshold? In which case a separate entity is needed, as the VAT threshold is by entity not business. Most relevant for B2C (business to consumer) businesses, eg shops and services for the public, than B2B (business to business) arrangements. In B2C situations not being vat registered will probably save you money or make you more competitive, whilst with B2B situations there is probably a benefit in being vat registered.
- If you are involving others in your business, and want to give them shares or make them directors, then a separate entity would be suggested.
- If there are risks in one of your businesses, eg large trade debtors (credit customers), IR35 exposure risks, then separate entities may allow some ring fencing – most important if you have separate businesses with significant value in them.
- Accounting and administration costs – for small additional activities through an existing company there is probably no additional accounting or administration costs, but this would change if you set up another company.
If you are setting another business up it probably pays to have a discussion with us about the best structure.
It is possible to invest funds through your company, but in most cases it would be more sensible to invest them in your own name. Here are some things to consider:
- Almost all investments are made out of post tax income. If you are a Higher Rate tax payer then the advantage in investing via your company is that the investment fund would only have been taxed at Corporation Tax rates as opposed to Higher Rates of Income Tax. However investments made via a company are subject to a less favourable Capital Gains Tax regime, and in many cases this would mitigate any saving obtained by investing at a lower tax rate – for example, property investments are often inefficient when made via a company as the capital growth will be subject to potential double taxation.
- In the case of small scale speculative equity investments on the stock market the Capital Gains Tax regime again favours personal investment.
- Another important consideration is keeping things simple – mixing investment activities with your contracting activities may complicate your company’s administration.
- Money set aside for tax purposes should never be invested in property, equity or mutual funds.
- Surplus cash in your company, including tax savings, may be invested in a high interest account with no problem, although the account must be in the company name, not your name.
- Investments and large cash balances in the company may lead to a less favourable tax treatment on closure of the company.
- Investments held in your company name become subject to trade risks, eg if your company was faced with a large retrospective tax bill under IR35, or suffered a large bad debt.
Its worth discussing this with ourselves or a Financial Advisor. We strongly err toward keeping investing and trading separate, but, of course, individual advice is needed.
Pension and insurance provision is important, you need to consider:
- Pension provision
- Health and sickness and income protection insurance
Pension Taxation has become very complex in recent years. This is a quick overview, but advice from an Independent Financial Advisor (IFA) is needed on pension and retirement investment planning.
Personal Contributions – the maximum annual pension contribution limit (“Annual Allowance”) is £40,000 for individuals – or the equivalent of their salary/earned income (not dividends) if lower – subject to a £3,600 minimum in all cases. If you have a high income then there is a taper base where:
- Threshold income, which is broadly net income before tax (excluding pension contributions), is over £200,000; and
- Adjusted income, which is broadly net income plus pension accrual, is over £240,000.
- Where this applies the £40,000 allowance tapers at £2 for every £1 of income over £240,000 down to a minimum of £4,000.
For Employer Contributions (including those made by your own company) – there is no salary / earnings cap other than “reasonableness”, which in most cases is self evident. Employer contributions count towards the Annual Allowance referred to above, which serve to create a cap on Employer Contributions.
A 3 year carry forward rule allows unused annual allowances to be used up over the following 3 years, but within the same existing Pension Scheme (ie you can’t set up a new scheme and use carry forward forward allowances).
Contributions in excess of these limits are taxed.
There is also a Lifetime Allowance cap, currently (April 2016 onwards) £1,073,100. Take advice from a Financial Advisor if this is a concern – it is tested when you access your pensions, and any excess subject to a tax clawback.
Currently, individuals receive tax relief on their pension contributions at their marginal Income Tax rate. For an employer contribution the company saves tax at Corporation Tax rates and for Company Director/Shareholders there will be a saving in Dividend Tax.
Many people combine regular investment in a pension plan with regular investments in other savings schemes such as an ISA to create a mixed portfolio, some within a Pension “wrapper” some outside.
Company directors can make independent pension arrangements, indeed as can anyone else, and opt out from Auto Enrolment for their own salary.
Health and sickness and income protection insurance
Consideration needs to be given to matters such as:
- Mortgage protection
- Short term sickness/accident cover
- Long term disablement/death cover
- Private Healthcare
In most cases the costs of this cover will not be tax deductible, and therefore should not be put though your company. There are some exceptions with certain Life Assurance policies known as “Relevant Life Policies” where the company is the beneficiary – you will need personalised advice on these.
Private Healthcare can be company funded, but bear in mind it will be a taxable Benefit in Kind and subject to Income Tax and NI. Its often simpler to pay this privately unless you have a number of staff and there are merits in a company wide scheme.
Advice from an IFA is recommended for the above. We suggest a thorough review of your investment and insurance position when you start running your own company, and then periodic reviews afterwards, say every five years, at major birthdays or at times of change like marriage, starting a family, etc.
Your Independent Financial Advisor
It is important that you establish a rapport with an Independent Financial Advisor to review both your pension and retirement provision, and your health, sickness and income protection insurances.