Premiums paid by a sole trader or partner to provide life,
accident or sickness insurance cover for him/herself or a partner
are not allowable deductions in computing profits under Schedule D
Case I or II. Such insurance policies are often known as permanent
health insurance policies.
The benefits payable under such policies are not trading
income.
The benefits are generally tax-free, see ICTA88/S580A,
IPTM6000 onwards and
information on the IR Internet site.
Sums set aside by traders out of their profits to form their own insurance funds should be treated as reserves and not as insurance premiums. They are also not allowable deductions in computing profits taxable under Schedule D Cases I or II if they are to provide for payments to the trader or a partner in the event of their sickness, injury or death. Such payments are appropriations out of the profits of the sole trader or partnership after they have been earned, and are not expenditure incurred in earning the profits.
