Section 189 Payments in respect of personal injuries
(1) This section shall apply to any payment made-
(a) to or in respect of an individual who is permanently and totally incapacitated by reason of mental or physical infirmity from maintaining himself or herself, and
[(b)(i) pursuant to the issue of an order to pay under section 38 of the Personal Injuries Assessment Board Act 2003, or
(ii) following the institution by or on behalf of the individual of a civil action for damages,
in respect of personal injury giving rise to that mental or physical infirmity.]1
1 Para (b) substituted by Finance Act 2004 section 6 from 1 January 2004.
(2)(a) In this subsection-
“relevant gains” means chargeable gains (including allowable losses) within the meaning of the Capital Gains Tax Acts, which accrue to an individual, to or in respect of whom payments to which this section applies are made, from the disposal of-
(a) assets acquired with such payments,
(b) assets acquired with relevant income, or
(c) assets acquired directly or indirectly with the proceeds from the disposal of assets referred to in paragraphs (a) and (b);
“relevant income” means income which arises to an individual, to or in respect of whom payments to which this section applies are made, from the investment-
(a) in whole or in part of such payments, or
(b) of income derived directly or indirectly from such payments,
being income consisting of dividends or other income which, but for this section, would be chargeable to tax under Schedule C or under Case III, IV (by virtue of [section 59, section 745 or section 747E]1) or V of Schedule D or under Schedule F.
(b) Where for any year of assessment the aggregate of the relevant income arising to and the relevant gains accruing to an individual exceeds 50 per cent of the aggregate of the total income arising to and the total chargeable gains (including allowable losses) accruing to the individual for that year of assessment-
(i) the relevant income shall be exempt from income tax and shall not be reckoned in computing total income for the purposes of the Income Tax Acts, but the provisions of those Acts relating to the making of returns shall apply as if this section had not been enacted, and
(ii) the relevant gains shall be exempt from capital gains tax, but the provisions of the Capital Gains Tax Acts relating to the making of returns shall apply as if this section had not been enacted.
(c) For the purposes of computing whether a chargeable gain is, in whole or in part, a relevant gain, or whether income is, in whole or in part, relevant income, all such apportionments shall be made as are, in the circumstances, just and reasonable.
Subs (2) substituted by Finance Act 2004 section 17(1)(a) for 2004 and later tax years.
1 Substituted by Finance Act 2007 section 11(a) from 1 January 2007.