If your employee is injured at work and you pay them compensation, you do not have to report these payments or pay tax or National Insurance as long as certain conditions apply.
You do not have to report to HM Revenue & Customs or pay tax and National Insurance if:
- The payment is in return for the employee’s agreement not to make a legal claim against you.
- The employee is not automatically entitled to the payment under their employment contract.
- You would have had to make the same payment to a member of the public under similar circumstances.
- You and the employee discussed and negotiated appropriate compensation.