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Chapter SAIM2330

Document Cited in Related
Vincent
Published date19 March 2016
Record NumberSAIM2330
CourtHM Revenue & Customs
IssuerHM Revenue & Customs
Interest included in damages for personal injury

Interest on damages (including, in Scotland, solatium) in respect of personal injuries or death included in an award by order of a court in any part of the United Kingdom is exempted from tax by ITTOIA05/S751. Such interest may be granted for the period, or any part of the period, from the date the cause of action arose to the date of the award. ‘Personal injuries’ for this purpose includes any disease or impairment of a person’s physical or mental condition.

Interest on damages awarded in corresponding circumstances by a foreign court is also exempt from tax, provided the interest is exempt from tax in the country in which the award is made. For years before 2005-06, this extension was concessionary, under ESC/A30. It was made statutory by ITTOIA05/S751(1)(c).

The exemption conferred by ITTOIA/S751 extends to the interest element in:-

  • a payment into Court for which judgement is never given, and
  • an out of court settlement.

It does not extend to interest on the sum awarded for the period between the date judgement is given and the date of payment.

‘Interest on damages’ in ITTOIA05/S751 means any element of the damages award that represents compensation for the delay between the occurrence of the personal injury and the award of damages. See the guidance at SAIM2090 on determining whether or not a lump sum that someone receives contains an interest element.

The exemption does not cover any interest that may be earned if the damages award is subsequently invested, or any capital gain that arises on such investments.

Example

Alice, a leaflet deliverer, sustained severe injuries on 1 July 2015 after being attacked by a householder’s dog. She took legal action against...

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