Post Office fiasco and tax again.

Treatment of compensation payments and “recoveries” from the Post Office.

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Did anybody else see the item over the weekend,whereby a tax expert (sorry sir can't remember your name) expounded on the Post Office incorrectly claiming a massive tax deduction for potential compensation payments ?This was followed up by an MP,questioning as to whether the Post Office had declared "recoveries" as taxable.

The expert contended (I believe) that the compensation provision claimed,could not be W&E for the purpose of the trade ?He believed HMRC are interested.I assume the tax comp was done in house and not by the auditing firm ?I believe whether the provision was general is also in point.

On the second aspect surely the Post Office must have declared "recovery" receipts in the accounts and tax comp ?

Anybody else intrigued by this further twist on the Post Office scandle ?

Replies (6)

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Danny Kent
By Viciuno
15th Jan 2024 10:51

You are probably talking about the report by Dan Neidle, of Tax Policy Associates.

https://www.taxpolicy.org.uk/2024/01/12/934m/?utm_source=substack&utm_me...

Agree with you that it is only reasonable to assume the "recoveries" were credited to the P&L at some point. However that would assume that the system was correctly creating credit's to match it's debits. Considering the people involved seemed incapable of "reconciling" these accounts at all - who knows?

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Replying to Viciuno:
RLI
By lionofludesch
15th Jan 2024 16:19

Viciuno wrote:

Agree with you that it is only reasonable to assume the "recoveries" were credited to the P&L at some point.

Crediting the recoveries to P&L would be an admission that the money was not owed by the subpostmasters in the first place.

Which, if true, raises a number of questions. Mainly about the integrity of Post Office management.

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By RetiredTax
15th Jan 2024 10:51

I think this was Dan Neidle. I haven't looked at the details so won't comment on what might be the correct treatment. I think (it is said) there was a mention in the P O A/C's that HMRC were "discussing" this aspect (Enquiry?!) and the reported profits may require adjustment.
It was also hinted that whilst claiming relief for the payments The P O.. excluded them from the calculation of profits for the purpose of calculating the Executive bonuses!

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Replying to RetiredTax:
By SteveHa
15th Jan 2024 11:23

It's based on the 1906 case, Strong & Co of Romsey v Woodfield, which HMRC still rely on, and which found that payment of compensation for a failing that was not a part of the business (and in the case of the Post Office, [***] the sub-postmasters would not be a part of their business any more than dropping a chimney on someone in said case was a part of the appellant's business), and so costs not incurred W&E and not deductible.

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Replying to SteveHa:
By SteveHa
16th Jan 2024 13:24

Damn - the censored word was the same word used to describe what you do when attaching two pieces of wood together using the appropriate tool to rotate a threaded metal rod, usually with either a flat, or a philips head.

Not sure why that should be censored.

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Replying to RetiredTax:
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By FactChecker
15th Jan 2024 14:30

"It was also hinted that whilst claiming relief for the payments The P O.. excluded them from the calculation of profits for the purpose of calculating the Executive bonuses!"

It was indeed so hinted ... though without much tone of astonishment given their demonstrable lack of differentiating between Debits and Credits back on the 'shop floor'!

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