HMRC normally accepts damages payable as a result of injuries suffered by the employee at work are not earnings, unless they are specifically provided for under the contract (when they can be regarded as 'derived' from that contract and the employment thereunder). In some ways the potential exemption for injury payments is analogous with the 'fair bargain' principle (see E4.660) ie the tax legislation is intended to tax profits or true benefits from employment. Compensating the employee, for a loss which the employment itself has caused, merely aims to put the employee back into the position (of health etc) they enjoyed before they were injured, and is not therefore such a profit or benefit.
Ongoing payments for injuries
In addition, no liability to income tax arises in respect of certain periodical compensation payments because they do not arise from an office or employment (see E4.401 also E1.553). These include:
- Ìý
•ÌýÌýÌýÌý payments under the old Workmen's Compensation Acts, and
- Ìý
•ÌýÌýÌýÌý industrial injury and disablement benefits under the Social Security Contributions and Benefits
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Web page updated on 17 Mar 2025 15:25