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Keyman insurance:

What's the tax treatment if a policy pays out

Keyman insurance is only one type of insurance coming under the umbrella of Business Protection Insurance. The tax situation is generally treated as such -
  • Keyman Insurance/Profit Protection - No direct legalisation exists and businesses are advised to contact the Inland Revenue for guidance. In most circumstances expect tax-relief on premiums unless the Keyman is a substantial shareholder. Then the premiums are unlikely to receive tax-relief as the Revenue will argue any payout will largely be for the benefit of such a shareholder

  • Director/Partner protection insurance - In most cases the premiums don't attract tax-relief and in turn the proceeds are not usually taxed

  • Business Loan protection insurance - In most cases the premiums don't attract tax-relief and in turn the proceeds are not usually taxed
However, corporation tax is always a tricky matter and it is advisable to seek guidance from your Finance director as well as The Inland Revenue itself.
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