Medical Negligence Compensation: Tax Treatment

Introduction

Many people pursuing a Medical Negligence claim are concerned about whether any compensation received will be subject to tax. While every situation is different and specialist tax advice may be required, the general position in Ireland is reassuring for most claimants.

Medical Negligence compensation is intended to compensate an injured person for the losses and suffering they have experienced, rather than to provide a financial gain. As a result, compensation awards for personal injuries are generally not subject to income tax or capital gains tax.

Compensation Awards

Compensation in a Medical Negligence claim can consist of several different elements, including:

• General damages for pain, suffering and loss of quality of life

• Special damages for expenses already incurred, including medical expenses, rehabilitation costs and care needs

• Loss of earnings (past and future) arising from the injury

In most cases, compensation awarded for these losses can be received without any tax liability arising on the award itself.

Compensation for Loss of Earnings

Many claimants are particularly concerned about compensation awarded for loss of earnings.

Although wages and salary are ordinarily subject to income tax, compensation for lost earnings is generally assessed by reference to a person's net income, namely the amount they would have received after tax and other deductions. As the award reflects lost take-home pay, it is not usually taxed again when paid to the claimant.

Tax on Income Generated from Compensation
It is important to distinguish between a compensation award itself and any income generated from investing that money in the future.

While the original settlement is generally tax free, any interest, dividends or investment gains earned on those funds may be subject to tax in the normal way. There can be exceptions in certain circumstances, including where an individual is permanently and totally incapacitated and qualifies for relief under the Taxes Consolidation Act 1997.

Why Choose Lavelle Partners for Medical Negligence Compensation?

Our award-winning Medical Negligence Team, headed by partner Avril Scally, have decades of experience in handling complex medical negligence compensation claims.

We have developed a reputation for excellence, having being acclaimed as Medical Negligence / Personal Injury Law Firm of the Year at the Irish Law Awards in both 2023 and 2022.

We understand the significant impact that Medical Negligence can have on families and we strive to provide clear, and practical advice throughout the claims process. See how we have recently helped clients in cases involving a delayed cancer diagnosis claim, hospital surgical negligence and a delay in diagnosing hip dysplasia.

Further Information

For details on types of medical negligence compensation, including how claims are assessed and the factors that influence compensation, see Medical Negligence Compensation: A Practical Guide.

For details about when Medical Negligence may arise, what needs to be proven in a claim and the time limits that apply, see Medical Negligence Claims: A Practical Guide.

For expert legal guidance on Medical Negligence compensation, please contact Partner Avril Scally or Solicitor Grace Molloy in our award-winning Medical Negligence & Personal Injury Team.