Periodical Payment Orders (NI) Update
12 November 2014
Since our August 2014 update on Periodical Payment Orders in Northern Ireland, a further Judgment of Mr Justice Gillen (as he then was) has been published in relation to KD (a minor) by DK, his mother and next friend v Belfast Health and Social Care Trust  (copy Judgment can be found here).
The Judge had previously stated that, in relation to future care, the PPO must make provision for care on additional days such as when the Plaintiff could not attend school or an Adult Education Centre (for example, due to inclement weather closing the school, or due to illness). On those days, the Plaintiff would require the assistance of two carers.
The issue brought before the Judge, was whether, or not, such payments for future care fell within the meaning of the Section 2 of the Damages Act 1996. If not, they would not fall within the provisions of section 731(2)(a) of the Income Tax (Trading and Other Income) Act 2005 or other relieving sections of that Act and, therefore, the payment would be subject to Income Tax.
Accountancy evidence was given by experts for both the Plaintiff and Defendant. The expert for the Plaintiff considered that such payments would be subject to Income Tax as the amount and/or date of these payments was not fixed. The Plaintiff’s expert stated that to take account of this, the Defendant either ought to ‘gross up’ the figures to include the tax payments due, or make a lump sum award. The expert for the Defendant considered that such payments would not be subject to Income Tax as, despite the amount or date not being fixed, a formula or methods to determine such a sum would fall within the legislation.
Mr Justice Gillen made some interesting comments in his Judgment. He stated that:-
- Nothing is gained by staring myopically and pedantically at individual words (such as amount or date);
- Parliament did not intend the PPO legislation to create a group of hurdles set up to “trap the unwary” and take such agreements outside the ambit of the 1996 legislation; and
- A formulaic approach not only courses through the provisions for indexation and for increasing and decreasing the sums, but is necessary to ensure that common sense prevails.
Mr Justice Gillen found in the Defendant’s favour, namely, that there is no need to gross up the figures awarded in PPOs for additional care to include tax payments due, or to make a lump sum.