Death in service benefits
Produced in partnership with Keith Bruce-Smith and Katie Walsh of Sinclair Gibson LLP
Death in service benefits

The following Private Client practice note produced in partnership with Keith Bruce-Smith and Katie Walsh of Sinclair Gibson LLP provides comprehensive and up to date legal information covering:

  • Death in service benefits
  • Overview of the types of death in service benefits and their tax treatment
  • The registered group life policy
  • Eligibility conditions
  • Actively at work requirements
  • What benefits are provided?
  • Taxation treatment
  • Relevant life policy
  • UK tax implications of the relevant life policy
  • Establishment of the relevant life policy trust and its tax treatment
  • More...

Overview of the types of death in service benefits and their tax treatment

There are three types of death in service benefit:

  1. the registered group life policy

  2. the relevant life policy

  3. the excepted group life policy

They share the same characteristics:

  1. employees eligible for the policy benefits must be aged between 16 and 74

  2. the use of a discretionary trust should avoid any charge to inheritance tax on a given employee's death

  3. employer-paid premiums are usually tax-deductible

  4. premiums are not treated as a benefit in kind for employees

The registered group life policy

This is a group policy registered with HMRC pursuant to Part 4 of the Finance Act 2004 (FA 2004). It offers employers a flexible approach to meeting the death in service benefits promised to their employees. The policy, which must be registered as a scheme with HMRC, covers lump sum benefits payable on the death of an employee.

As soon as an employee satisfies the ‘eligibility’ and ‘actively at work’ conditions as below, they must be included on the policy. Typically, a minimum number of five members is required when the policy starts:

Eligibility conditions

An employer can define eligible membership categories in a number of ways (eg by job grade, salary band or job type). Membership must be compulsory for all employees within the defined categories. Eligibility conditions covering entry age, entry dates and service qualifications must

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