Tax ruling still awaited on healing compensation

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NHS Highland is still waiting for a ruling on the tax treatment for compensation received by bullying victims after the Sturrock review.

Last year it emerged that compensation, being paid through payroll to staff who had experienced inappropriate behaviour including workplace bullying and harassment, was being taxed.

NHS highland wrote to HMRC only last month, after some payments had already been awarded, to seek a ruling on how compensation payments are being treated.

David Garden, NHS Highland director of finance, recently confirmed there had still been no response when asked about it by Highlands and Islands MSP Donald Cameron.

Mr Cameron has now called for ‘this episode’ to be brought to a conclusion without any further delay.

‘NHS staff deserve thanks and ‘should certainly not find themselves still waiting for this matter to be resolved,’ he said.

Although it had been noted in the compensation scheme that payments would be subject to applicable tax and national insurance, there were different assumptions made about what that meant and how those payments would be made.

Highlands and Islands MSP Edward Mountain, who raised the issue of bullying compensation with the First Minister on December 10 last year, said NHS Highland should have asked the tax question to HMRC months ago.

‘I fully support the Healing Process but it is disappointing that bullying victims have seen their compensation taxed when I believe this could have been avoided. We should never forget that these settlements should not be viewed as earnings, you do not get a wage to be bullied,’ he said.

It has also just emerged, via a Freedom of Information request, there were no NHS Highland meetings, including sub-committees, where the Healing Process compensation payments were discussed. Also, legal advice taken before taxable payments were decided for any payouts to people who signed up for the Healing Process was not received in any formal documents or emails, but was discussed throughout the set up and launch of the process.

Sandy Wilkie, a former head of NHS human resources for Argyll and Bute’s health and social care partnership, was the first victim of bullying to be offered compensation.

Mr Wilkie, who now lives down south and has set up a consultancy business, said in his view the Healing Process was ‘badly designed’ and that the  HMRC was not consulted as it should have been about tax and national insurance matters.

‘They first spoke to HMRC in mid-December by which time the first payouts had already been loaded and incorrectly coded on HR Payroll as Tax & NI liable. So a Level 3 victim expecting a £25,000 payout got £13,800 in their hand – and then had their benefits stopped.

‘NHS Highland human resources seemed to have no understanding of the impact such news might have on some victims who were vulnerable, still suffering from mental health issues and perhaps even unemployed,’ he said.

Mr Wilkie fears NHS Highland has ‘taken one step forward in admitting bullying but two steps back’ and claims there are real risks that the organisational culture ‘remains toxic’.

‘A number of us would like John Sturrock to be invited back in to review progress, but I don’t think NHSH would be brave enough to expose their mistakes,’ he said, adding that ultimately it was ‘probably going to need the politicians’ questions, Freedom Of Information requests and pressure of the media to continue to lift a lid on things.

A spokesman for Argyll and Bute HSCP said: ‘Based on the specific and unique nature of the Healing process, which is not a legal or employment process and can be accessed by current and former colleagues, there is no current HMRC provision for us to process payments except through payroll, deducting PAYE and NICs.  We have been advised on this position by Shepherd and Wedderburn, who are the legal and tax advisors for the Healing Process.   We have written to HMRC to explain the details of the Healing Process and understand if any specific dispensation can be made and to confirm specific details on the tax treatment and we are awaiting their view. Once this is received, the outcome will be communicated and any changes actioned, including to payments already made.’