Looking for advice gift from work

clarecooper90

My dad’s company received a key man life insurance policy after he passed away. They have said they’d like to give the family some money from this. I am looking to find out if there are any tax implications for this as it’s a gift, but not from his estate etc. 

Brie

If they are giving the family a gift then there shouldn't be any tax issues.  As it's to the family it wouldn't be included in any IHT calculations.

That's my guess anyways.  This might do better on the probate board where people who know about death and taxes will notice it.  If you don't mind I'll move it over there.

Etchergifts

Life insurance payouts to your family from a key man policy are usually tax-free, even if the company gives the money directly. Only get worried if it’s structured like a “bonus” or has conditions.

clarecooper90

Thankyou both 🙂

poseidon1

clarecooper90 said:

My dad’s company received a key man life insurance policy after he passed away. They have said they’d like to give the family some money from this. I am looking to find out if there are any tax implications for this as it’s a gift, but not from his estate etc. 

Keyman insurance is supposed to be a policy designed to benefit the employing company in the event of death of a key employee, whose demise is thought to materially damage the company's future profitability.

Regrettably you have supplied insufficient information to determine whether the company's generosity in favour of  the family, may have income tax and NIC implications as set out in the article below  -  

https://barnesroffe.com/insights/key-man-insurance/#:~:text=If the policy was taken,reverse is not necessarily true.

The problem here is that HMRC may not have had an opportunity to consider the company  and estate tax position of the policy receipts ( and how they have been applied), until such time a company tax return is submitted, unless the company had the foresight  to obtain HMRC clearances prior to the distribution. 

Given there can be a substantial time  lag by the time a corporation tax return is lodged by the company, the estate executors could have already distributed the cash ( in good faith), only to find themselves with potential outstanding tax liabilities but no funds to settle them.

Therefore having regard to potential issues raised in the Barnes Roffe article, it would be prudent to return to the company to determine if they had sought pre distribution tax clearances from HMRC, or at the very least had obtained professional tax advice  with regard to the tax implications of both sides of this transaction.