Income Tax (Trading and Other Income) Act 2005

Periodical payments of personal injury damages etc. U.K.

731 Periodical payments of personal injury damages U.K.

(1) No liability to income tax arises for the persons specified in section 733 in respect of periodical payments to which subsection (2) applies or annuity payments to which subsection (3) applies.

(2) This subsection applies to periodical payments made pursuant to—

(a) an order of the court, so far as it is made in reliance on section 2 of the Damages Act 1996 (c. 48) (periodical payments) (including an order as varied),

(b) an order of a court outside the United Kingdom which is similar to an order made in reliance on that section (including an order as varied),

(c) an agreement, so far as it settles a claim or action for damages in respect of personal injury (including an agreement as varied),

(d) an agreement, so far as it relates to making payments on account of damages that may be awarded in such a claim or action (including an agreement as varied), or

(e) a Motor Insurers' Bureau undertaking in relation to a claim or action in respect of personal injury (including an undertaking as varied).

(3) This subsection applies to annuity payments made under an annuity purchased or provided—

(a) by the person by whom payments to which subsection (2) applies would otherwise fall to be made, and

(b) in accordance with such an order, agreement or undertaking as is mentioned in subsection (2) or a varying order, agreement or undertaking.

(4) In this section “damages in respect of personal injury” includes damages in respect of a person's death from personal injury.

(5) In this section “personal injury” includes disease and impairment of physical or mental condition.

(6) In this section “a Motor Insurers' Bureau undertaking” means an undertaking given by —

(a) the Motor Insurers' Bureau (being the company of that name incorporated on 14th June 1946 under the Companies Act 1929 (c. 23)), or

(b) an Article 75 insurer under the Bureau's Articles of Association.

Modifications etc. (not altering text)

C1 S. 731 modified (1.4.2010) by The MFET Limited (Application of Sections 731, 733 and 734 of the Income Tax (Trading and Other Income) Act 2005) Order 2010 (S.I. 2010/673), arts. 1(1), 2(1)(2)

C2 S. 731 applied (with modifications) (18.5.2011) by The Skipton Fund Limited (Application of Sections 731, 733 and 734 of the Income Tax (Trading and Other Income) Act 2005) Order 2011 (S.I. 2011/1157), arts. 1(1), 2

732 Compensation awards U.K.

(1) No liability to income tax arises for the persons specified in section 733 in respect of annuity payments if they are made under an annuity purchased or provided under an award of compensation made under the Criminal Injuries Compensation Scheme [F1 or the Victims of Overseas Terrorism Compensation Scheme].

(2) The Treasury may by order provide for sections 731, 733 and 734 to apply, with such modifications as they consider necessary, to periodical payments by way of compensation for personal injury for which provision is made under a scheme or arrangement other than the Criminal Injuries Compensation Scheme [F1 or the Victims of Overseas Terrorism Compensation Scheme].

(3) In this section—

• “the Criminal Injuries Compensation Scheme” means—

  (a)

  the schemes established by arrangements made under the Criminal Injuries Compensation Act 1995 (c. 53),

  (b)

  arrangements made by the Secretary of State for compensation for criminal injuries in operation before the commencement of those schemes, or

  (c)

  the scheme established under the Criminal Injuries (Northern Ireland) Order 2002 (S.I. 2002/796) (N.I.1), and

• “personal injury” includes disease and impairment of physical or mental condition.

Textual Amendments

F1 Words in s. 732(1)(2) inserted (8.4.2010) by Crime and Security Act 2010 (c. 17), s. 59(2), Sch. 2 para. 3

733 Persons entitled to exemptions for personal injury payments etc. U.K.

The persons entitled to the exemptions given by sections 731(1) and 732(1) for payments are—

(a) the person entitled to the damages under the order, agreement, undertaking or to the compensation under the award in question (“A”),

(b) a person who receives the payment in question on behalf of A, and

(c) a trustee who receives the payment in question on trust for the benefit of A under a trust under which A is, while alive, the only person who may benefit.

Modifications etc. (not altering text)

C3 S. 733 modified (1.4.2010) by The MFET Limited (Application of Sections 731, 733 and 734 of the Income Tax (Trading and Other Income) Act 2005) Order 2010 (S.I. 2010/673), arts. 1(1), 2(1)(3)

C4 S. 733 applied (with modifications) (18.5.2011) by The Skipton Fund Limited (Application of Sections 731, 733 and 734 of the Income Tax (Trading and Other Income) Act 2005) Order 2011 (S.I. 2011/1157), arts. 1(1), 2

734 Payments from trusts for injured persons U.K.

(1) No liability to income tax arises for the persons specified in subsection (2) in respect of sums paid under a lifetime trust—

(a) to the person (“A”) who is entitled to—

(i) a payment under an order, agreement or undertaking within section 731(2) or an annuity purchased or provided as mentioned in section 731(3), or

(ii) compensation under an award within section 732(1), or

(b) for the benefit of A.

(2) The persons are—

(a) A, and

(b) if subsection (1)(b) applies, a person who receives the sum on behalf of A.

(3) For the purposes of subsection (1), sums are paid under a lifetime trust if they are paid—

(a) by the trustees of a trust under which A is, while alive, the only person who may benefit, and

(b) out of payments within section 731(2) or (3) or 732(1) which are received by them on trust for A.

Modifications etc. (not altering text)

C5 S. 734 modified (1.4.2010) by The MFET Limited (Application of Sections 731, 733 and 734 of the Income Tax (Trading and Other Income) Act 2005) Order 2010 (S.I. 2010/673), arts. 1(1), 2(1)(4)

C6 S. 734 applied (with modifications) (18.5.2011) by The Skipton Fund Limited (Application of Sections 731, 733 and 734 of the Income Tax (Trading and Other Income) Act 2005) Order 2011 (S.I. 2011/1157), arts. 1(1), 2