Taxes Consolidation Act 1997 section 189

Payments in respect of personal injuries

Section 189 exempts from income tax and capital gains tax the investment returns arising to permanently incapacitated individuals from compensation payments awarded by the courts, made under out-of-court settlements, or following assessment by the Personal Injuries Assessment Board in respect of personal injury claims.

• The section applies to compensation payments made to or in respect of an individual who is permanently and totally incapacitated by reason of mental or physical infirmity from maintaining themselves, where the payment arises from a Personal Injuries Assessment Board order, a court award, or an out-of-court settlement following institution of civil proceedings.
• Income arising from the investment or reinvestment of qualifying compensation payments ("relevant income") is exempt from income tax, PRSI and USC, and gains arising from the disposal of assets acquired with such payments or reinvested proceeds ("relevant gains") are exempt from capital gains tax.
• The exemptions only apply where the aggregate of the individual's relevant income and relevant gains exceeds 50 per cent of their total income and total chargeable gains for the year of assessment, excluding certain Department of Social Protection payments such as Illness Benefit, Invalidity Pension, and Injury or Disablement Benefit from the calculation.
• Even where the exemption applies, the individual must still include all exempt income and gains in their annual tax return, and a medical certificate confirming permanent and total incapacity must be provided to support the claim.