Tax Expert Warns Post Office of Possible £100M Bill and Insolvency Due to Horizon Scandal

The Post Office could be facing a £100 million bill and potential insolvency after claiming tax relief for its compensation payments to subpostmasters. This was according to tax expert Dan Neidle, who is the head of non-profit organization Tax Policy Associates. He stated that the Post Office claimed £934 million tax relief for its compensation payments and suggested that it could be considered “unlawful.”

The Horizon scandal involved over 700 subpostmasters and subpostmistresses who received criminal convictions due to faulty Fujitsu accounting software, which made it appear as if money was missing from their branches.

Following the airing of the ITV drama “Mr Bates vs The Post Office,” Prime Minister Rishi Sunak announced that those wrongly prosecuted in England and Wales could have their names cleared by the end of the year under new legislation.

According to Mr. Neidle, the Post Office has treated the compensation paid to postmasters as tax deductible, which he stated is “not correct.” He explained that tax deductions are only applicable for payments made “wholly and exclusively” for the purposes of the trade.

While some tax experts agreed with Mr. Neidle, others expressed that the matter is not clear cut, with one expert suggesting that a business can usually claim tax deductions for expenses that are closely connected to its trade, even if it is a compensation payment.

The Post Office stated that the disclosed information on taxation in its annual report and accounts is “appropriate and accurate.” Mr. Neidle’s post on X accused the Post Office of claiming £934m tax relief for the compensation payments, calling it “outrageous” and “unlawful,” and stating that they now face an unexpected £100m tax bill and potential insolvency.

Mr. Neidle further stated that the Post Office has treated the compensation it pays to postmasters as tax deductible, which he believes is incorrect. He mentioned that a source at the Post Office confirmed that HMRC is investigating and asserting that the Post Office owes tax, which Mr. Neidle supports.

Chair of the Commons Business and Trade Committee Liam Byrne described the situation as “shocking” and accused the state-owned company of underpaying taxes and overpaying bosses.

He indicated that the committee will be asking questions about the tax relief when they question Post Office chief executive Nick Read and Fujitsu’s head of Europe Paul Patterson. HMRC declined to confirm or deny investigations, stating that they do not comment on identifiable taxpayers.

A spokesperson for the Post Office mentioned that their annual report and accounts contain accurate taxation information and that they have been in discussions with the government regarding the tax treatment of compensation funding received.