Death in Service payment from own company?

Dolce_Vita_Girl

Seeking advice for a friend who owns and runs a limited company with her husband. Both are directors of the business. Sadly the husband died earlier this month and we're now trying to bring in money to cover mortgage payment, funeral expenses etc. No life insurance policy. Could the business make a one-off, ex gratis payment to the husband (deceased) or provide a Death in Service benefit to the deceased's family?? Is this ethical/legal?? Just trying to brainstorm. All advice welcome and appreciated. Thanks

madbadrob

I think to give a death in service payment would be fraught with legal implications not to say accounting implications when the end of year figures have to be sent to companies house.

As a director of the company why doesnt the widow just authorise a wage increase to herself backdated x amount of months.

Dont you have to pay into a scheme for death in service benefits and are they not only for employee's?

Rob

Dolce_Vita_Girl

Thanks for your speedy thoughts. I know that in MY job I get Death in Service benefits as an employee, but I don't contribute towards it in any way. Will do some more searching, thanks.

RAS

Dolce_Vita_Girl wrote: »

Thanks for your speedy thoughts. I know that in MY job I get Death in Service benefits as an employee, but I don't contribute towards it in any way. Will do some more searching, thanks.

Do you pay into a pension fund?

pollypenny

Dolce_Vita_Girl wrote: »

Thanks for your speedy thoughts. I know that in MY job I get Death in Service benefits as an employee, but I don't contribute towards it in any way. Will do some more searching, thanks.

If you contribute to a pension scheme you contribute to Death in Service benefits.

antrobus

Dolce_Vita_Girl wrote: »

.... Could the business make a one-off, ex gratis payment to the husband (deceased) or provide a Death in Service benefit to the deceased's family??....

Of course it can.

The friend and the estate of her deceased husband own it, and they can do what they like, so long as the company has the money.

Of course, any ex-gratia payment to the estate or the family would probably be taxable. But I don't know that for certain; I'd ask that question on the Cutting Tax board.

madbadrob wrote: »

I think to give a death in service payment would be fraught with legal implications....

What "legal implications" do you have in mind? I can't think of any.

madbadrob wrote: »

.... not to say accounting implications when the end of year figures have to be sent to companies house. .

You haven't done much in the way of company accounting have you?:rotfl:

antrobus

antrobus wrote: »

....Of course, any ex-gratia payment to the estate or the family would probably be taxable. But I don't know that for certain; I'd ask that question on the Cutting Tax board.....

Following on from that, I did find this source here;

The taxation of termination payments
http://www.emtax.co.uk/blog/the-taxation-of-termination-payments

Certain payments made on termination of employment fall completely outside the tax regime, and are not taken into account in amounts to which the £30,000 exemption is applied. These exemptions include....death, injury and disability exemption – no tax is payable on payments of death benefits, where the death brought about the termination of the employment. HMRC interpret the exemption for termination on injury or disability very narrowly

Dolce_Vita_Girl

Thanks Antrobus.

madbadrob

Antrobus other than my own accounts every year no I havent. The implications are those that a Limited company have to abide by. A sole trader or a non limited partnership can do what they want so long as legal with their money. Because of the nature of a limited company I would advise talking to an accountant before doing anything.

As I understand Death in Service payments these are for employees and they pay into the scheme although that is based on the one company where we had this.

Rob

antrobus

madbadrob wrote: »

Antrobus other than my own accounts every year no I havent. The implications are those that a Limited company have to abide by. ...

Give us an example.

madbadrob wrote: »

.... A sole trader or a non limited partnership can do what they want so long as legal with their money. Because of the nature of a limited company I would advise talking to an accountant before doing anything.....

A limited company can do what it likes with its own money so long as it's legal as well. There is nothing illegal, or indeed even untoward in a company making an ex-gratia payment to a former employee. It happens all the time.

getmore4less

Not all death in service payments are pension linked some companies run serperate policies that are non contributory.


I suspect that to self insure death in service benifits the company would have to have some records it existed.

Much like redundancy payments I understand these get looked at quite closely when small companies are involved as it is a easy way to get £30k tax free if a group of you do a round robin LTD company setup/shutdown.