Hopes have been raised that NHS Highland bullying victims will have settlement payments exempt from tax after a series of complaints.
The payment process was branded “cruel” after it emerged pay-outs could be as much as halved once taxed.
One former worker saw an expected £25,000 payment reduced to £13,000, having believed settlements would be ex-gratia and therefore tax free up to £30,000.
Compensation was offered following the Healing Process, established after the independent review by John Sturrock QC on allegations of bullying and harassment within the health authority.
NHS Highland said it was advised it must process the payments via the payroll, and deduct applicable tax and national insurance, but is now seeking clarity.
It has told claimants: “Whilst there has been discussion about whether these payments could be subject to a tax-free status for all or part of the payment and whether they should be paid outside payroll, we do not have a dispensation to do this and are obliged to process via payroll using existing tax codes, or one-time tax codes for those not currently employed, unless and until a ruling from HMRC confirms that a different treatment should be applied.
“We have written to HMRC to clarify the situation and should they subsequently give a dispensation to process out with payroll, this will then be applied.”
In a written answer to Highland MSP David Stewart, the health secretary Jeane Freeman said: “We are aware of the concerns about tax deductions and the board are addressing the concerns raised by actively pursuing these directly with HMRC to reaffirm the position and to explore if there is any dispensation available in respect of the compensation payments. Without this they cannot legally waive tax or NI contributions.”
She said she is waiting on HMRC’s decision to “inform further actions”.
Mr Stewart said he was glad that NHS Highland had reviewed the decision and hoped HMRC would be able to devise a method where compensation would no longer be taxed.
“Having even small amounts of this money deducted and taxed has disrupted people’s benefits and brought further stress for those who have contacted me.
“What I can’t understand is why this wasn’t thought through more thoroughly in the first place.
“A large number of constituents have continued to contact me from the start of this whole process more than two years ago and it’s been a bumpy ride for them.
“Here’s hoping there’s light at the end of the tunnel.”
Linda Kirkland, former director of operations for NHS Highland and a member of the support group No More Victims, said: “Why did they not do this before? It would have saved a lot of heartbreak and hardship.
“But provided that what they have asked HMRC recognises people have been harmed, and they are not receiving any funds that are compensation in lieu of earnings, I think it’s a good thing.”
The ex-employee who saw his payment cut said he has also contacted HMRC about the issue which he said is having a “highly detrimental effect” on his mental health.
HMRC said previously it could not comment on identifiable taxpayers.