Tax and estate duty problems in respect of policies on the lives of employees and directors

Abstract

These notes are an attempt to answer a question which is often asked and might at first sight appear to be a simple one, viz. ‘What is the tax and estate duty position where a company effects an assurance on the life of an employee (or director) and what would be the position were the man to take out the policy himself, the company providing the premiums?’ The first point to settle is— ‘What is the purpose of the policy?’—and then, related to that, ‘What class of assurance is intended?’ Besides the tax and estate duty aspects there is the question of the respective rights in the disposal of the policy proceeds which may in some cases over-ride the financial considerations.Where alternative procedures are available the relative financial effect can, in some instances, only be assessed by someone with an intimate knowledge of the accounts of the company and the affairs of the life to be assured. It is desirable in any case that the inquiries should be dealt with through the company's accountant. It might well be asked whether such matters are not entirely the province of the professional accountant. Whatever opinion may be held about this, the fact remains that life offices are to an increasing extent consulted on technical matters involving taxation and estate duty even by members of the legal and accountancy professions.