‘Personal injury’ is not defined in the tax
legislation although
ITTOIA05/S732 says that personal injury includes
disease and impairment of physical or mental condition.
It also says that damages in respect of personal injury
includes damages in respect of a person’s death from personal
injury.
Orders of a UK court in respect of damages for personal injury
made under the Damages Act 1996 extend to damages in respect of
fatal accidents. This is because the meaning of “claim or
action for personal injury” in the Damages Act 1976 includes
claims or actions brought under the Fatal Accidents Act 1976 or the
Fatal Accidents (Northern Ireland) Order 1977.
Periodical payments might arise where, for instance, a court
orders that regular payments should be paid for a certain time to
the children of a person who was killed in an industrial accident.
Then, the tax exemption in
ITTOIA05/S731 extends to such periodical
payments.
From 1 April 2005, where an order of a court
outside the UK is similar to a UK order made under the Damages Act,
periodical payments in respect of damages for a fatal accident are
treated in the same way as if it was an order from a UK court. This
is because of amendments to the tax legislation made by the Courts
Act 2003, as part of wider changes to the Damages Act 1976, which
took effect on 1 April 2005.
This means that periodical payments made on or after 1 April
2005 under such an order will also be exempt from tax. This will be
the case even if the order was made before 1 April 2005.
Periodical payments of damages
before 1 April 2005 in respect of deaths made
under an order of a court outside the UK were taxable.
Note however that this only applies to damages for deaths.
Periodical payments of damages for personal injury under an order
from a foreign court have been treated in a similar way to damages
under a UK order since the general exemption took effect on 29
April 1996, as described in
IPTM5010.
| Further reference and feedback | IPTM1013 |
