Vaccine Damage Payments: Payments under the Vaccine Damages Act 1979
Vaccine damages are paid as tax-free lump sums under the Vaccine Damages Act 1979. They are paid to people who are severely disabled as a result of vaccination against certain diseases. Once paid, it is up to the recipient (or whoever is acting on his or her behalf) what they do with the money: some may put it into a trust fund, others may invest the money in another way, for example to produce an annuity.
The beneficiary of the Vaccine Damage Payment is the child and as such it should be disregarded for tax credit purposes.
Where the child has grown up and makes a claim for tax credits in his or her own right, any continuing income from the vaccine damage trust must be declared as investment income.