{"id":9176,"date":"2023-02-19T20:00:36","date_gmt":"2023-02-19T20:00:36","guid":{"rendered":"https:\/\/www.taxpolicy.org.uk\/?p=9176"},"modified":"2023-12-27T22:51:06","modified_gmt":"2023-12-27T22:51:06","slug":"postoffice","status":"publish","type":"post","link":"https:\/\/heacham.neidles.com\/2023\/02\/19\/postoffice\/","title":{"rendered":"The tax scandal within the Post Office scandal, and how to fix it."},"content":{"rendered":"\n

The hundreds of victims of the Post Office scandal are finally receiving compensation for the appalling treatment they received – including malicious prosecution, jail and asset seizures. But much of the compensation could be taken in tax, the Post Office settlement offers don’t properly explain this, and victims could end up in default to HMRC. It’s a scandal on top of a scandal, and the Government should act.<\/em><\/strong><\/p>\n\n\n\n

UPDATE: as of 19 June 2023, <\/strong>it looks very much like this has now been solved<\/a><\/p>\n\n\n\n

UPDATE 14 March<\/strong>: the Government responds<\/a>, and says they’ll fix the “compression” effect where postmasters receiving multiple years of lost income in one go get pushed into a higher tax bracket. But no sign of a general exemption. Disappointing.<\/p>\n\n\n\n

UPDATE 27 Feb:<\/strong> the Post Office has finally responded in a letter to The Times<\/a> – but much too slow, no acknowledgement of responsibility, and an inadequate compensation principle. These people have lost much more than money, and the compensation should reflect that. And it should certainly compensate for additional tax they suffer as a result of receiving multiple years’ income in one year. These practicalities are quite aside from the moral case for a complete tax exemption.<\/p>\n\n\n\n

UPDATE 23 Feb: <\/strong>Regulations have been published creating a tax exemption for wrongly convicted postmasters, and those who claimed under the GLO settlement<\/a>. But not yet anything for the people discussed in this piece, who are claiming under the Historical Shortfall Scheme or the Suspension Remuneration Review. There are hundreds.<\/p>\n\n\n\n

UPDATE 22 Feb: <\/strong>Times column by me here<\/a>. And a very fast, and promising, response from Kevin Hollinrake MP (the responsible Minister) here<\/a>.<\/p>\n\n\n\n

<\/p>\n\n\n

The Post Office scandal<\/h2>\n\n\n

Between 2000 and 2013, the Post Office falsely accused more than 700 branch managers of theft<\/a>.1<\/a><\/sup>When I wrote this article I was significantly understating the number. We don’t have the full figures, but it is likely around 3,000.<\/span>Some went to prison. Many had their assets seized and their reputations shredded. Marriages and livelihoods were destroyed, and at least 33 have now died<\/a>, never receiving an apology or recompense. These prosecutions were on the basis of financial discrepancies reported by a computer accounting system called Horizon. The Post Office2<\/a><\/sup>Not to be confused with the Royal Mail – the Post Office wasn’t privatised and is owned wholly by the Government. Primary responsibility for the scandal rests with the Post Office alone, but successive governments (since the 2000s) share responsibility for not responding to early reports in Private Eye and Computer Weekly<\/span> knew from the start that there were serious problems with the Horizon system<\/a>, but covered it up, and proceeded with aggressive prosecutions<\/a> based on unreliable data. It’s beyond shocking, and there should be criminal prosecutions of those responsible<\/a>.<\/p>\n\n\n

The tax problem<\/h2>\n\n\n

Many of the victims of the scandal are now entering into settlement agreements with the Post Office (under the “Historical Shortfall Scheme<\/a>“), and receiving compensation. The Daily Mail (which previously played an important role in bringing the scandal to public attention<\/a>) reported on Thursday that much of this compensation is disappearing in tax<\/a>, and has kindly shared with me the terms of one settlement (with the relevant victim’s permission).3<\/a><\/sup>I have relied heavily upon other tax professionals who have provided input on these points – they are much more expert in these matters than I am – but, as ever, any mistakes are mine and mine alone.<\/span><\/p>\n\n\n\n

My conclusion is that the Mail is right. I fear that the tax impact of the settlements on the victims has not been thought-through and, as a consequence, much of the compensation will disappear in tax. There are two big issues:<\/p>\n\n\n\n

No tax advice<\/strong><\/p>\n\n\n\n