It is not the case that if the business decides not to apply for tax relief on the premiums, any proceeds will necessarily be tax-free. The taxation decisions rest with HM Revenue & Customs, and there are reported cases where the Revenue has taxed benefits on which the premiums did not obtain tax relief.

However, such policy proceeds should usually escape tax, unless the proceeds are payable in instalments. As above, each case should be referred to the local Inspector of Taxes for guidance before the policy is implemented.

It is therefore very important that the effects of taxation should be considered when setting the sum assured on key person cases.

These types of plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.

Information regarding taxation levels and basis of reliefs are dependent on current legislation and individual circumstances, are not guaranteed and may be subject to change.