Taxation on deposits arising from compensation payment.

M

moneymania

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I know somebody who has in excess of 100k in a deposit account that came from a compensation payment after a work accident. The same person can no longer work and is on disability benefit. What are the tax implications of the lump sum that has been awarded?
 
see s189 TCA 1997 payments in respect of personal injuries.

in short, "relevant income" means income arising from investments of compensation (includes income under Case IV which is Deposit Interest).

if the relevant income exceeds 50% of the total income arising to an individual in a tax year, the relevant income shall be exempt from income tax, but the person will still need to submit a tax return.

so looks like the deposit interest is taxable. compensation is not taxable under s613(1)(c) TCA 1997
 
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