Q: I have been unwell for some time but I’m able to get by with my disability allowance and some assistance towards my housing costs. While I am far from comfortably off, I’m hoping that a long running compensation case related to my illness will shortly conclude. However, I’m worried that if any settlement is paid I will lose any entitlement to disability and housing. Can you give me any comfort?
A: Generally speaking, disability allowance, and any consequential assistance you might get towards housing, is means tested. The Department of Social Protection will look at your income and your assets. If they fall above a certain threshold, you may lose your entitlement to disability allowance.
Various things are taken into consideration in a means test, including any cash income from any settlement you may get, as well as capital you may have, be it in the form of savings or property etc.
Compensation is generally counted as a ‘cash’ income for the purposes of disability allowance. That said, some specific forms of compensation are not taken into consideration. These include payments made as a result of Hepatitis C cases, payments made by the Residential Institutions Redress Board, or payments made as a result of the Cervical Check scandal.
You should check with your solicitor and your accountant as to whether your settlement will be dealt with in this manner. If you do not have an accountant, you should obtain the services of one.
You should also check and see if you are eligible to move to another form of assistance, such as Disablement Benefit or Invalidity Pension, which are not generally means tested. However, there are different qualifying criteria for these schemes, and you should research carefully which may or may not apply to you.
It is important to note that any sum you may receive by way of compensation is not liable to income tax.
It also might be worth noting that any income you receive from investing your compensation award can itself be taxed. If you suffer from a “permanent or total incapacitation” you may be exempted from taxes on such investments.
The level of tax you might have to pay depends on the nature of the injury you sustained, whether or not your injury falls into certain exemptions for income or investment taxes etc.
All of the above aside, there may be ways that you can invest any settlement you receive in a tax and income efficient. Your accountant or financial advisor will be able to assist you in this regard.
