Life Cover Tax Deductible

[T5R+]

Just realised that I have never asked this question and somebody within PH must know the answer......if an individual (or couple) rent out a property (their old house) and take out life cover to safeguard payment of the capital/mortgage - is it tax deductible?

[dalenorth]

Do you own a Ltd company?

[T5R+]

No - should I?

Have contracted previously and accountant suggested that I can set up LTD irrespective if now PAYE as I may return to contracting.

[Kudos]

dalenorth said:

Do you own a Ltd company?

I presume he means he owns the property in individual names rather than running through a ltd company

Don't know the answer, but my suspicion is no

[Eric Mc]

I have never seen any instance where a landlord has claimed Life Assurance as a cost against rental income. I would expect that thetre is no justifiable reason in HMRC's eyes as to why it should be deductable.

[T5R+]

Just happen to be one of those people who moved home (with work) and kept our old home in case it did not work out and so have become an "accidental landlord".

As I have always had a repayment mortgage, wonder if this could be viewed differently to interest only and justifiable? Suppose that I could always try it and die before the HMRC realise

[dalenorth]

The only way it can legally be done, is it take a relevant life policy paid for by a Ltd company and use trusts to move the benefit out of the company.

Pm me if you would like any more details.

[bobbylondonuk]

This is a brilliant question. Why is an insurance policy to cover the Liability of the business against outstanding finance+charges on an asset not deductible?

[Rambaud]

bobbylondonuk said:

This is a brilliant question. Why is an insurance policy to cover the Liability of the business against outstanding finance+charges on an asset not deductible?

Because it's a personal expense. Even if it was not, the normal procedure would be to allow the deduction and then tax the proceeds on death. So to gain (say) a few pounds for deduction of the premiums you then pay Income Tax on many thousands. Not usually a smart move.

Others may have in mind Key Man insurance?

[Eric Mc]

The first thing I thought of was Key Man Insurance,.

But I have only ever seen that allowed in "Trading" situations where the input of a key individual in the business is so vital that an insurance policy taken out by the business againsty their life or health is allowed on the basis that it is for the purpose of the trade.

[scotal]

Entirely apropos of nothing, if you put the house into a Ltd co you will seriosuly restrict the number of mortgages (both resi & BTL) open to you. You'd have to be claiming back a shedload of tax to make it worthwhile compared to the interest rates you'd find yourselves paying on the loan.

[Rambaud]

Eric Mc said:

The first thing I thought of was Key Man Insurance,.

But I have only ever seen that allowed in "Trading" situations where the input of a key individual in the business is so vital that an insurance policy taken out by the business againsty their life or health is allowed on the basis that it is for the purpose of the trade.

Agreed. Perhaps if the landlord employed Capability Brown as a gardener.

Property Rental is now a bit of an ambivalent hybrid - neither a trade nor an investment.

[Eric Mc]

I suppose one could give it a try - and see what happens. Knowing the way HMRC don't check things properly these days - who knows?

[anonymous-user]

just claim it

if they ask, argue your case

worst that can happen is that you have to pay it back

[F458]

You may be able to use a Relevant life policy lots of ifs and buts though. Worth having a look at it maybe.

[T5R+]

I will be claiming and if challenged have to repay - they may fine add penality but hey.

Thanks all for pushing me over the edge of uncertainity.

[Eric Mc]

Have you checked what the legislation says?

Have you asked HMRC?

Have you engaged the services of an accountant?

I would think that these are reasonable steps to take to find out what the correct thing to do might be.

Read CARFULLY what it says on this website under "Insurance".

http://www.uklandlordtax.co.uk/allowable_expenses_...

The normal defaut position is that LIFE insurance/assurance is NEVER allowable against either business profits or rental income.