Section 731 | Periodical payments of personal injury damages

(1)No liability to income tax arises for the persons specified in section 733 in respect of periodical payments to which subsection (2) applies or annuity payments to which subsection (3) applies.

(2)This subsection applies to periodical payments made pursuant to—

(a)an order of the court, so far as it is made in reliance on section 2 of the Damages Act 1996 (c. 48) (periodical payments) (including an order as varied),

(b)an order of a court outside the United Kingdom which is similar to an order made in reliance on that section (including an order as varied),

(c)an agreement, so far as it settles a claim or action for damages in respect of personal injury (including an agreement as varied),

(d)an agreement, so far as it relates to making payments on account of damages that may be awarded in such a claim or action (including an agreement as varied), or

(e)a Motor Insurers' Bureau undertaking in relation to a claim or action in respect of personal injury (including an undertaking as varied).

(3)This subsection applies to annuity payments made under an annuity purchased or provided—

(a)by the person by whom payments to which subsection (2) applies would otherwise fall to be made, and

(b)in accordance with such an order, agreement or undertaking as is mentioned in subsection (2) or a varying order, agreement or undertaking.

(4)In this section “damages in respect of personal injury” includes damages in respect of a person's death from personal injury.

(5)In this section “personal injury” includes disease and impairment of physical or mental condition.

(6)In this section “a Motor Insurers' Bureau undertaking” means an undertaking given by —

(a)the Motor Insurers' Bureau (being the company of that name incorporated on 14th June 1946 under the Companies Act 1929 (c. 23)), or

(b)an Article 75 insurer under the Bureau's Articles of Association.