Victims of bullying at NHS Highland should not have had tax taken off their compensation payments, HMRC has ruled.
NHS Highland’s chief executive has apologised for the confusion and upset, and the board says it will now refund anyone whose payment under the board’s Healing Process should not have been taxed.
Pam Dudek admitted that in retrospect it would have been better to ask HMRC for clarity before the compensation scheme went live.
One former social worker told how their award following a multitude of mental problems that left them unable to work was almost halved.
In a further twist, because the money was classed as earnings, their benefits were stopped.
Problems revolve around the Healing Process, which was set up to help current and former employees after an independent report by John Sturrock QC exposed “fear, intimidation and inappropriate behaviour” at the health board.
A series of solutions are available under the process, including a formal apology, psychological support and, for the most serious cases, compensation.
The board had previously defended its position in the face of criticism, arguing payments had to be subjected to tax because they were paid through the payroll system.
However, in December NHS Highland admitted the issue had not been fully considered when the Healing Process was drawn up and asked HMRC to rule on the issue. HMRC had not previously been approached.
The tax authorities have told the board said any payout relating to healing and harm should not be taxed, which NHS Highland said was the ‘vast majority’.
Non-taxable payments will now be paid by bank transfer rather than through payroll, the board added, with it made clear in advance whether any part of an award relates to loss of earnings and still subject to PAYE.
Local politicians who have campaigned on behalf of victims said the U-turn was a victory for common sense but questioned why the health board had not acted sooner.
Highlands Labour MSP David Stewart said the news would be a “great relief to those being awarded money for the bullying and harassment they’ve endured.”
“Constituents have been writing to tell me the huge amount of tax they have had to pay, sometimes on a relatively small amount of compensation.
“That has not only caused them further upset and harm, but in some cases has disrupted their benefit or pension payments.”
Local Conservative MSP Edward Mountain criticised “faulty advice and slow decision making”.
“This tax fiasco could have been avoided from the beginning had NHS Highland raised this issue with HMRC earlier,” he said.
“This would have spared bullying victims from a lot of additional pain, hurt and financial worries.”
NHS Highland Chief Executive Pam Dudek said: “We welcome the HMRC decision that the vast majority of Healing Process payments will not be subject to tax.
“And we sincerely apologise for upset and harm caused by the initial confusion on what the tax situation would be for this unique service.
“While we sought in good faith to make payments as quickly as possible once recommendations had been approved, in retrospect, delaying payment while we sought clarification from HMRC might have been advisable.
“We are pleased that participants in the process now have clarity, and we would encourage others who qualify to register with the service designed to help them heal.
“We have been unequivocal in our support of those who have experienced bullying and harassment. I would like to reaffirm that we are deeply sorry for the harm that has been caused to every one of those individuals.”