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

There are three types of death in service benefit (also known as ‘life assurance’ benefit or ‘life cover’ benefit) which employers may provide by way of a Life policy:

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 (‘IHT’) 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,