Compensation for injuries at work

Produced by a Tolley Employment Tax expert

Employment Tax

Guidance

Introduction

If an employee is injured as a result of something that happens at work then, in certain circumstances, compensation payments can be made to them which have no income tax, NIC or reporting requirements.

Issues regarding compensation payments for injuries suffered at work are covered in EIM06450 where these payments are referred to as ‘injury payments’.

Compensation payments

Lump sums

A lump sum paid to an employee due to an injury at work is not subject to tax or NIC as it is not caught by the legislation. It does not come under ITEPA 2003, s 62 as it is not earnings and nor is it within the definition of a termination payment under ITEPA 2003, s 403. There are no income tax, NIC or reporting requirements associated with compensation payments for injuries suffered at work as long as all the following requirements are satisfied. If any of these are not satisfied, then they will bring the payment into a charge under the legislation:

•
the payment to the employee is of the same nature and

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