Income Tax: tax relief for compensation payments from the Infected Blood Schemes
Published 14 September 2017
© Crown copyright 2017
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Who is likely to be affected
Individuals infected with HIV or Hepatitis C through NHS treatment with contaminated blood and their family members who receive periodic compensation payments through the Infected Blood Schemes for England, Wales and Northern Ireland.
General description of the measure
This measure makes sure that the existing relief from Income Tax is available for those receiving compensation payments from new Infected Blood Scheme administrators.
Policy objective
Payments made by the new schemes for England, Wales and Northern Ireland will not give rise to tax charges, consistent with the treatment of payments previously made by the existing schemes and those continuing to be made by the Scottish scheme.
Background to the measure
Since 1988 successive governments have set up various schemes to provide financial support to those infected with HIV and Hepatitis C through NHS treatment with contaminated blood. The longstanding position has been that such compensation payments should be exempt from tax and, in the past, where necessary, orders have been made to provide an exemption.
The Department for Health has been consulting on improvements to the schemes for those infected in England and in line with reforms announced on 13 July 2016 they increased the payments made, with similar improvements introduced for Wales and Northern Ireland. The new Scottish scheme introduced similar improvements for Scotland. The July announcement confirmed that these payments would continue to be exempt from tax.
Following on from this review, new scheme administrators are being introduced for England, Wales and Northern Ireland. The new schemes, administered by the NHS Business Services Authority in England, the Velindre NHS Trust in Wales and the Regional Business Services Organisation in Northern Ireland replace the existing schemes. The existing tax orders do not cover payments made by these new scheme administrators, so periodic payments made through the new schemes would be subject to Income Tax in the absence of this measure.
This measure makes sure that the periodic payments made by the new scheme administrators for England, Wales and Northern Ireland are exempt from tax. A new Scottish Infected Blood Support Scheme was introduced to consolidate the existing schemes for Scotland in April 2017 and payments from this scheme are covered by the existing relief.
Detailed proposal
Operative date
The order is expected to come into force on 23 October 2017 before the new Infected Blood Schemes start making payments. The measure will apply to payments made by the new schemes from the date the order comes into force.
Current law
Section 683 of the Income Tax (Trading and Other Income) Act 2005 charges Income Tax on annual payments not otherwise charged to tax. Section 731 exempts from tax certain periodic payments of personal injury damages for those persons detailed in section 733. Section 734 extends this to include payments from trusts, but this does not cover the payments to be made by the new schemes. In the absence of a specific exemption, periodic payments made by the new schemes that fall within the definition of annual payments would therefore be taxable under section 683.
Proposed revisions
A statutory instrument will be introduced to extend the application of sections 731, 733 and 734 of the Income Tax (Trading and Other Income) Act 2005 to periodic payments by the new Infected Blood Schemes for individuals infected with HIV or Hepatitis C through NHS treatment with contaminated blood.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure is expected to affect less than 3,000 people.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
As those with HIV fall within the disability equality group, this measure will have a positive impact for the small number of those infected and their widows, widowers and surviving civil partners. Apart from these, it is not anticipated that there will be any impacts for those in any other equality group.
Impact on business including civil society organisations
This measure is expected to have no impact on businesses and civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
No operational impact on HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with stakeholders affected by the measure.
Further advice
If you have any questions about this change, please contact Jenny McDougall on Telephone: 03000 593627 or email: jenny.mcdougall@hmrc.gsi.gov.uk.
Declaration
Mel Stride MP, Financial Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.