Bump of an old thread but I was researching this for myself. What I surmise is as follows:
1) Compensation received for personal injuries does
not constitute income but is rather a
capital gain and thus falls to be taxed (or otherwise) as such a gain
2) Section 613 of the Taxes Consolidation Act 1997 says:
613.—(1) The following shall not be chargeable gains—
...
(c) any sum obtained by means of compensation or damages for any wrong or injury suffered by an individual in his or her person or in his or her profession.
3) The confusion that has arisen here is from income received on that capital; i.e. if you invest that money, you become liable for income tax on that investment; say you get 200 grand and you use it to buy an apartment and rent it out, you would be liable to income tax on that rental income
unless the injury was of the catastrophic kind mentioned above.
Thus, no capital gains tax is payable on the lump sum received, only income tax on the
income that capital generates, not on the total amount. Repeat: Compensation payments are
not income. Yeay!