Relevant Life Plans: Tax-Efficient Life Cover for Directors Abroad
A relevant life plan is a specific type of employer-funded, individually written life assurance policy. In the United Kingdom and several other common law jurisdictions, it provides a way for a company — including a personal service company, owner-managed business, or small employer — to fund life cover for an employee or director in a tax-efficient manner that would not otherwise be available outside a registered group scheme.
For directors who operate internationally — running UK-registered companies from abroad, contracting through their own company, or working for foreign subsidiaries of UK businesses — relevant life plans raise specific questions of eligibility, tax treatment, and practical feasibility that this guide addresses directly.
The Core Mechanics of a Relevant Life Plan
A relevant life plan is a term life assurance policy written on the life of an individual employee or director. The key structural features are:
The employer is the policyholder. The company (not the individual) takes out and owns the policy.
The employer pays the premiums. The cost is borne by the business.
The benefit is written in trust. The sum assured does not form part of the employer's assets; on death, it is paid directly to the trust for distribution to the named beneficiaries (typically family members).
Discretionary trust. The policy must be written in trust — most providers include a standard trust deed — and the beneficiaries are selected from a class (typically spouse, children, and dependants).
The result is that the employer funds term life cover for the employee, the proceeds are received outside the employee's estate and without probate, and the arrangement is structured to qualify for significant tax efficiencies.
Tax Treatment in the UK Context
In the United Kingdom, where most relevant life plans are regulated and distributed, the tax treatment is as follows (all subject to meeting HMRC's conditions and employer's circumstances; tax treatment may change):
Corporation tax deduction. Premiums paid by the company are typically deductible as a business expense, reducing the company's taxable profit. This is in contrast to personal life insurance premiums, which are not deductible.
No benefit-in-kind. The premium paid by the employer on behalf of the employee or director is not treated as a P11D benefit-in-kind, meaning it does not generate an income tax charge for the individual.
No National Insurance. Premiums are not subject to employer's or employee's National Insurance contributions.
Outside the estate. Because the policy is written in trust and the employer owns it, the death benefit does not form part of the employee's estate for inheritance tax purposes.
Outside the lifetime allowance (now abolished). Historically, relevant life policies were outside the pension lifetime allowance. The lifetime allowance was abolished on 6 April 2024 and replaced by the lump sum allowance and lump sum and death benefit allowance; relevant life policies, being non-registered arrangements, fall outside those allowances too. The separate treatment of relevant life therefore remains broadly intact. Specialist advice should always be taken as this area continues to evolve.
The contrast with a personal life policy — funded from post-tax personal income, potentially creating an IHT liability if not in trust, and with no corporation tax relief — is significant.
Eligibility: Who Qualifies?
A relevant life plan is available to:
- Employees, including controlling shareholders and directors who are also employees
- Workers paid through a personal service company (the company, not the individual, takes out the policy)
Key eligibility conditions typically include:
- The individual must have a contract of employment with the sponsoring employer
- The policy must be a term assurance only — no investment or savings element
- Benefits must be expressed as a multiple of earnings (typically up to 25 times total remuneration for working life policies, or lower multiples for policies extending to older ages)
- The policy cannot provide benefits to the employer company itself
The UK's HMRC guidance on relevant life policies and section 393B of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) govern the regime. Tax rules may change and the specific conditions must be met in full.
Internationally Based Directors: The Key Questions
For a director who is based outside the UK, several questions arise:
Is the Company UK-Registered?
If the director works for a UK-registered company — a limited company incorporated in England, Wales, Scotland, or Northern Ireland — a relevant life plan can in principle be arranged, provided the director holds a contract of employment with that company and is paid a salary through UK payroll (or equivalent).
Is the Director a UK Tax Resident?
The tax benefits of a relevant life plan — specifically the corporation tax deduction and the absence of a benefit-in-kind — depend on UK tax treatment. A director who is not UK tax-resident may not be subject to UK income tax on the premium and therefore the absence of a benefit-in-kind is less materially valuable. However, the corporation tax deduction for the UK company remains available provided the expense meets the "wholly and exclusively" test.
Where Is the Employer Registered?
If the employing entity is not UK-registered, a UK relevant life plan is generally not available. The employing entity must be within the UK tax system for the corporation tax deduction to apply. International employers considering life cover for directors abroad should look at other structures — group life assurance or individual international life assurance in trust — rather than a UK-specific relevant life plan.
What If the Director Has Foreign Tax Obligations?
A director based in, say, the UAE, Spain, or Cyprus may have tax obligations in their country of residence that are separate from any UK tax position. Some countries treat employer-paid life insurance premiums as a taxable benefit in the hands of the employee (even if the UK does not). This depends on local tax law and must be confirmed locally.
Sum Assured Limits
HMRC imposes limits on the sum assured under a relevant life plan to prevent the structure being used as a tax-free wealth accumulation vehicle. The permitted maximum sum assured is:
- For policies that run to the employee's normal retirement date: expressed as a maximum death benefit, calculated by reference to projected pension fund as well as current earnings
In practice, individual policies for directors are commonly written at 10–25 times salary, and many providers have automated calculators that confirm the permissible maximum at outset. Policies that exceed the limit do not qualify for the tax advantages.
The Trust Deed
The policy must be written in an appropriate discretionary trust. Most relevant life plan providers include a bespoke trust deed as part of the policy documentation. The key features:
- Discretionary: The trustees can distribute among a class of potential beneficiaries (typically the spouse/civil partner, children, dependants, and sometimes other specified family members)
- Employer as trustee: Typically the employer and another individual (often the employee) are appointed as trustees at outset. Successor trustees should also be considered.
- Beneficiary class: Should be reviewed when family circumstances change (birth of children, marriage, divorce, estrangement)
For internationally based directors, it is important that the trust deed is recognised and workable in the jurisdiction where the beneficiaries reside. A simple UK discretionary trust deed will function for UK-resident beneficiaries; for beneficiaries in the UAE or Spain, additional legal advice may be required about the recognition of the trust in those jurisdictions.
Comparing Relevant Life with Alternatives
| Structure | Corporation tax deduction | No benefit-in-kind | Outside estate | Suitable for expat directors? |
|---|---|---|---|---|
| Relevant life plan | Yes (UK companies) | Yes (UK tax) | Yes (in trust) | Limited — UK company required |
| Group death in service | Yes (employer) | Yes | Sometimes (in trust) | Yes, with international group schemes |
| Personal life in trust | No | N/A | Yes (in trust) | Yes |
| International life in trust | N/A | Depends on jurisdiction | Yes (in trust) | Yes — best option for non-UK structures |
For internationally based directors operating through non-UK entities, an international life assurance policy in a discretionary trust — with employer premium payment reviewed for deductibility locally — is typically the more appropriate structure.
Practical Steps for UK Company Directors Abroad
Confirm residency and tax status in both the UK and the country of residence. Understand whether you will be assessed on the premium as a benefit in your country of residence.
Confirm the employing entity. The relevant life plan must be taken out by the UK company; the director must have an employment contract with that company and receive a salary through it.
Calculate an appropriate sum assured. Use a multiple of total remuneration up to the HMRC-permitted limit.
Appoint appropriate trustees. Consider whether family members abroad or a professional trustee is more appropriate given the likely location of beneficiaries.
Review the trust annually and particularly after any change in family circumstances or change of country of residence.
Seek tax advice in both jurisdictions. What qualifies for a corporation tax deduction in the UK does not automatically mean the premium is invisible to the tax authorities where the director is resident.
How Global Investments Can Help
Global Investments works with company directors and business owners across multiple markets. For those with UK company connections, we can help establish relevant life plans with appropriate trust structures. For those based in non-UK jurisdictions, we can design international alternatives that achieve similar estate planning outcomes while being appropriate for the specific legal and tax environment.
We coordinate with local tax advisers and trust lawyers to ensure that the chosen structure is effective in every relevant jurisdiction.
This guide is for information only. Tax treatment of relevant life plans depends on individual circumstances, the employing company's tax position, and the law of both the UK and any other jurisdiction where the director is resident. Tax rules change. Seek regulated financial and tax advice before proceeding.
This guide is for general information only and does not constitute financial or insurance advice. Policy terms, premium rates, and insurer eligibility criteria change — always verify current terms with a qualified independent adviser before taking out any policy.