Excepted Group Life Policy schemes

Typically, most employers who provide death in service benefits for employees do so through a scheme that is registered with HMRC.

However, in recent years, there has been an increase in the number of employers using an alternative type of arrangement: an Excepted Group Life Policy. Changes which have been proposed to take effect from 6 April 2019 could make such arrangements even more common in the future.

What is an Excepted Group Life Policy (EGLP)?

An EGLP is a life assurance policy for death in service benefits. EGLPs are set up under discretionary trusts with benefits paid to certain categories of beneficiary in the event of an employee’s death. There are certain conditions that must be met for an arrangement to qualify as an EGLP but registration with HMRC is not a requirement.

Why are EGLPs used?

The current position

Currently, premiums paid by employers towards retirement or death benefits are only exempt from being a taxable benefit in kind if the ultimate beneficiary is a member of the employee’s “family or household”.

If the beneficiary does not fall within this definition, the premiums paid by the employer are treated as a taxable benefit in kind.

The proposed changes

The Finance Bill 2018/19 (the Bill) proposes to extend the benefit in kind exemption to make it possible to pay a benefit to any individual or charity under an EGLP without the premium payable by the employer being taxed as a benefit in kind. The changes are proposed to take effect from 6 April 2019.

A key point to consider

In many cases, EGLPs are only used for senior employees who are affected by the LTA threshold. However, if the proposed changes make it through to the final act of Parliament, the much wider category of eligible beneficiaries could result in EGLPs being set up by more employers as an alternative to an HMRC-registered scheme.