When you hear “life insurance,” you probably think about protecting your loved ones when you’re gone. But what happens when companies buy life insurance policies for their workers, can they count the cost as a business expense and reduce their taxes?
In Uganda’s corporate world, few issues stir as much quiet debate as whether employee benefits qualify as deductible business expenses. At the centre of the storm is Group Life Assurance (GLA), a policy many employers buy to cushion their staff and their families against life’s uncertainties. But does paying for such cover reduce a company’s tax bill, or does the taxman view it as a perk that benefits workers more than the business?
Group Life Assurance (GLA) is a policy that an employer buys for its staff. It works differently from the personal life insurance many of us know. Instead of one person buying a cover for themselves, the company takes out a single policy to cover its entire workforce. If an employee dies while still working at the company, their family receives a benefit. Some policies even go further, covering accidents or disability.
For many employers, GLA is a way of showing care for staff and their families, while also providing a safety net that keeps employees motivated and loyal. But for the taxman, there’s always a bigger question: is this a cost of doing business, or simply a benefit to employees?
On 17 July 2025, the Tax Appeals Tribunal (TAT) delivered a landmark decision in Ndungu Benson & Insingoma Edgar v. Uganda Revenue Authority (URA), offering long-awaited clarity on whether group life insurance premiums qualify as deductible business expenses. The ruling, which directly affects companies offering employee benefit schemes, strikes a balance between protecting revenue and recognizing genuine business costs.
The Applicants, a firm of CPAs, had taken out a Group Life Assurance (GLA) policy for employees. They treated the premiums as a business expense, arguing that the policy functioned more like short-term insurance, contingent on employees remaining in service at the time of the insured risk materializing. For example, if an employee left the firm, the firm derived no benefit even if the risk later occurred.
The Uganda Revenue Authority (URA), however, disagreed. It disallowed the deduction, asserting that the premiums amounted to payments for life insurance, clearly disallowed under the ITA. To URA, the benefit was for the employee, not the employer, and thus could not be claimed as a business expense.
In its detailed ruling, the Tribunal acknowledged that life insurance is defined by its connection to human life, specifically the payment of benefits upon death. On that score, the Applicants’ GLA policy indeed fell within the ambit of life insurance to the extent that it provided for such benefits.
However, the Tribunal noted an important nuance. The GLA policy did not only cover death but also disability and accident, elements more akin to short-term or general insurance. These aspects were business-related, as they directly supported the employer’s ability to maintain a healthy and productive workforce.
Accordingly, the Tribunal ruled that the premiums should be apportioned. The life insurance portion would remain non-deductible, while the short-term elements could be allowed. Rejecting a simplistic 50:50 split, the Tribunal applied a proportional method, ultimately allocating 75% of the premiums to short-term cover (deductible) and 25% to life cover (disallowed).
This balanced approach was both pragmatic and consistent with earlier jurisprudence. In the case of Total Energies (U) Ltd v URA (TAT 8 of 2007), the Tribunal had similarly emphasized that deductions must be tied to the purpose of producing income, and apportionment may be necessary when an expense straddles allowable and non-allowable categories.
The ruling on Group Life Assurance (GLA) policies sets a clear precedent with technical consequences for both compliance and product structuring. Employers must now recognize that while certain components of premiums, such as accident or disability cover, remain deductible, the life insurance element is explicitly disallowed. This demands precise apportionment of costs, ideally based on actuarial valuations or explicit policy splits, rather than arbitrary allocations that may trigger disputes. Insurers, in turn, face pressure to restructure products for greater transparency, separating life cover from other risk benefits to help clients maintain tax compliance and minimize audit exposure.
From a regulatory and policy standpoint, the Uganda Revenue Authority (URA) and lawmakers have been reminded that tax exemptions must be interpreted narrowly, with no room for implied allowances. Unless Parliament amends the Income Tax Act, any group insurance that incorporates human life will continue to attract partial disallowance, potentially increasing employer tax burdens.
It recognizes the legitimate business cost of protecting employees against accidents and disability while preserving the statutory restriction against deducting life insurance. Employers who had long been uncertain about the tax fate of GLA premiums now have guidance: deduct what supports business operations, disallow what is strictly tied to life.
The decision also resonates with a wider theme in tax law, that the form of a transaction matters less than its substance. A group policy, even though collective, still relates to individual human lives. But where that same policy also addresses operational risks (like employee disability), then the expense cannot be painted with a single brush.
The Tax Appeals Tribunal delivered not just a judgment on premiums but also a practical roadmap for the future of employee welfare schemes in Uganda’s tax system.
The writer is a Chartered Accountant, Analyst and Tax Adviser