A man falsely accused of rape has been told he has grounds for compensation.
A tribunal in Taunton ruled Clive Bishop, of Walton, Somerset, can apply for compensation from the Criminal Injuries Compensation Authority (CICA).
In 2007, Mr Bishop was falsely accused of rape by a woman who made up the allegation. She was given a 10-month prison sentence as a result.
The 49-year-old said he lost his taxi business and was shunned by his local community as a result of the claims.
His previous attempts to claim from CICA had been turned down because he did not suffer physical damage.
I don't think that people understand the distress, the hurt that it caused myself, my wife my family and my friends.
Clive Bishop
In February 2007, Mr Bishop was arrested and charged with raping a girl he had picked up in his taxi.
Six weeks later he was told the case would not be proceeding as the girl had dropped her claim and had been charged with attempting to pervert the course of justice.
CICA's view that Mr Bishop was not entitled to compensation as he had not been a victim of physical violence was overturned by the court on Wednesday.
A spokeswoman for CICA told BBC News Online said it would not comment on individual cases.
Mr Bishop said: "I feel the way that I was treated - being arrested in my own living room at 4.30 in the morning in front of my wife - I don't think that people understand the distress, the hurt that it caused myself, my wife my family and my friends. It was horrific."
The Taunton tribunal has now ruled that Mr Bishop does have grounds for compensation and should continue with his application.
Lawyers say it is too soon to tell if this will set a precedent for other cases of mental and psychological damage.
Mr Bishop's solicitor Russell Pearce of Pardoes said: "We are absolutely delighted, it is the right result and it means that for the future other people may have the opportunity to make an application, which is very important."
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