Will compensation payment leave me in trouble with welfare?

I am one of the women affected by the Cervical Check failings. This will be due to be settled in the next few months.

I am currently on disability allowance and living in housing association accommodation. I have ongoing medical issues and this has stopped me securing any employment since and will be the same into the future.

From reading your column, I understand that I will have to pay my social welfare payments back to the Government after receiving my damages. I am unsure but I think I will have to leave my home also as I will no longer be under the income limits for the accommodation.

So my priority will be to find a property to purchase as a first-time buyer. Also, I had intended to use the money to rebuild my parents house but I would want a guarantee that the house would be left to me after their deaths as the cost will be in the region of €150,000-plus. Both are unemployed and haven’t been able keep the property maintained or updated since it was built 50 years ago.

Working out the market rent on property used by my child

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Or should I spend the money on purchasing a new home for them but in my name? I haven’t been given a figure for damages but have been told it will be in the region of €500,000-plus.

What are my tax obligations for any property I purchase or rebuild and repayments for social welfare?

Ms J.H., email

Cervical Check seems to be one more case of an Irish government trying to be seen to do the right thing by improving public services without ensuring that proper controls are in place and then getting unnecessarily defensive when things go wrong.

An audit carried out by Cervical Check of women diagnosed with cervical cancer  after a previous smear test in the programme found abnormalities had not been detected at the time of screening for 221 out of 1,482 women.

Had those abnormalities been detected at the time of screening, those women could have received earlier treatment for cancer or a warning that they were at risk of becoming ill. Instead, they remained unaware of the abnormalities for some time afterwards, some with fatal results.*

Putting this right is an ongoing and tortuous process with most of the women concerned having to go through the courts rather than what appears to be a compensation tribunal process that is not fit for purpose.

The last thing you need on top of all that stress is worry that a payment to recognise the damage done to you and your health could leave you without income or a home.

I have to say I’m surprised that you are so unsure about your position. Given everything that has happened, I would have thought that anyone affected by the Cervical Check failings – even where final decisions have not yet been made on their cases – would at least have been given clear information by the relevant government departments on where they stand with regard to impact of any future settlement on future healthcare and access to welfare if they are successful in securing compensation.

It seems an obvious measure ...but apparently not.

Financial means

The good news is that, at least with regard to the actual compensation payment, you have nothing to fear. Payments in respect of Cervical Check compensation – whether from the scoping inquiry, the tribunal or through the courts – will not be taken into account when assessing your financial means. I have checked this formally with the Department of Social Protection, though clearly without giving any details of your specific case.

In their response, they stated: "Under the regulations currently in force, payments made by the Cervical Check Tribunal or by the High Court in respect of Cervical Check claims are excluded from any social welfare means test. "

This means that any payment, regardless of its size, will not impact your eligibility for disability allowance, which is a means tested welfare payment.

The same should apply, as I understand it, to your housing association accommodation. This is because eligibility for social housing, including housing accommodation homes, is determined by income as measured by the means test. If the Cervical Check payment does not count towards the means test, I see no way that it should impact on your eligibility for social housing – with the housing association or elsewhere.

I also understand that the payment to you will not be taxed. This is standard with awards from courts or tribunals for personal injury.

However, income that arises from investing such an award – in your case, you think it might be above €500,000 – can be taxed unless you are treated under Section 189 of the Taxes Consolidation Act, 1997. That section allows for a total exemption from income tax on investment income where the person is "permanently or totally incapacitated by mental or physical infirmity from maintaining himself or herself".

Even given the limited information I have on your circumstances, it appears that you would be covered by that section but this will need to be confirmed by you with the Revenue Commissioners.

Housing

So the bottom line is that you should not be in a position where you have to find a new home. However, you might still decide that you want to do so. This is clearly a personal call and you need to remember that the compensation payment is designed to cover current and future needs.

I think it unlikely you will qualify for a mortgage from a mainstream lender so I imagine you would be looking to use some of the funds to buy a home.

What about investing in repairing your parents’ property. Again this is a personal choice but it could get messy. I don’t know whether you have siblings who might also have some expectation of inheriting some or all of the parents’ home on their deaths but, even if not, you would want a very secure legal contract in place with your parents for the avoidance of any confusion when they die.

There’s also the question of the value of investing in your parents’ home. You say they have not been able to afford to pay to maintain it over the past 50 years. On that basis, any refurbishment now could be a very expensive process – possibly even more than you are budgeting for – given current regulations on wiring, etc.

Separately, investing in properties that you don’t currently own can get complicated from a tax point of view down the line in terms of recognising that expenditure and impact on property value when the property does pass to you.

In an ideal world, it might make more sense, if you are keen to help them, that the money is invested in a more modern property. That would also have the additional benefit of allowing the property to be clearly in your name.

However, owning a property – regardless of how it is acquired – might affect your right to continue to live in the current housing association accommodation. To qualify for social housing, you must be in need of housing, But if you have alternative accommodation – and a home you own, even if occupied by your parents, would count as accommodation you could reasonably be expected to live in.

Your best bet, in practical terms, might be helping your parents pay for improvements to their home with a clear legal contract that it is a life loan or some such.

Either way, you will want clear professional legal and tax advice on that element.

* This article was amended on Thursday, July 22nd, 2021

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into