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HMRC to help postmasters with tax deadline issues

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HMRC has confirmed that it will cancel penalties and interest for sub-postmasters unable to meet their self assessment and tax payment deadlines due to late top-up payments from the Post Office.

5th Jan 2024
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Ten years after the Horizon scandal, which devastated the lives of more than 2,000 sub-postmasters wrongly accused of theft and false accounting, compensation payments have finally been made by the Post Office via the historical shortfall scheme (HSS).

Under the Gourley principle, compensation for loss of earnings should be structured tax-effectively so that recipients are restored to the position they would otherwise have been in. The Post Office failed to follow this principle, and instead compressed 10 years of earnings into one lump sum. As reported by Dan Neidle, founder of Tax Policy Associates, this careless approach by the Post Office had significant financial consequences by pushing many sub-postmasters into higher tax brackets. This meant that far more of the compensation payment would be lost to tax than if the earnings had been paid correctly over the 10-year period.

In June 2023 the Post Office announced that it would be making top-up payments to sub-postmasters in the HSS to reimburse the compensation unfairly lost to tax. They would also be able to claim up to £300 spent on obtaining tax advice. The government enacted that the top-up payments would be exempt from income tax, capital gains tax and national insurance.

In a ministerial statement on 19 June 2023 Kevin Hollinrake, Minister for Enterprise, Markets and Small Businesses stated: “So that payments can be made as swiftly as possible, the top-ups will be calculated so that no postmaster pays more than the basic rate of tax on the taxable elements of their compensation. This approach ensures that postmasters do not need to provide any further information.”

Not so swift

Six months later, with the 31 January self assessment and tax payment deadline fast approaching, Neidle reports that of the 1,924 HSS recipients only 831 tax top-up payment letters with individual calculations had been sent as of 20 December 2023. At a rate of 130 issued per week according to the Post Office, 1,100 postmasters will still be waiting to receive the top-up calculations and payments they desperately need to file their self assessment and meet their looming tax obligations.

Letters sent by the Post Office to affected sub-postmasters in November 2023 promised that all letters for tax top-up payments would have been sent by 31 March 2024, indirect confirmation that many will not receive the money in time to pay the tax. 

Speaking to AccountingWEB, Neidle expressed his frustration: “A small team of competent accountants could have resolved the top-up payments, and provided postmasters with the help they need, in a few weeks. The Post Office has failed to do it in six months and dumped 1,100 victims of the Post Office scandal in yet another mess. Words fail me at this point.”

With the top-up payments outstanding, these postmasters now face a hefty tax bill without the means to settle it. Many of the affected postmasters are now pensioners.

HMRC provides support 

To alleviate some of the inevitable anxiety, HMRC has promised not to penalise innocent sub-postmasters thrown once again into difficulty by the incompetence of the Post Office. In a statement to AccountingWEB the tax authority confirmed that it will cancel penalties and interest for sub-postmasters who, due to a late top-up payment, do not file their self assessment return and/or do not pay their tax on time.

HMRC has also set up a dedicated team to provide sub-postmasters with tax information required for their compensation claims.

An HMRC spokesperson said: “Postmasters who struggle to meet the deadline for paying their tax because of a late top-up payment will be able to have any penalties and interest associated with this cancelled. We will be publishing guidance soon.”

In praise of the tax authority for its swift action in offering support, Rebecca Benneyworth, tax lecturer and writer said: “It’s great to see HMRC stepping up to help sub-postmasters who have been so badly treated and have suffered so much through this scandal. Well done HMRC.”

Concerned HSS recipients are advised to seek expert advice if they have the means. Those who do not, and there will be many, should hold off paying the tax due on their compensation payments until they have received the top-up payment and details of how to claim the £300 for independent advice. Information about how affected parties might be eligible to access free advice will be available in the coming weeks.

Replies (21)

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By Tom+Cross
05th Jan 2024 11:20

The nightmare for these poor people, just goes on.
If ever one were to question what is not (at all) Great, about Britain, this is just one of those horror examples.
The Post Office have already got 'blood on their hands' and one wonders if the whole operation should be closed and a new organisation formed, with fresh management at the top.
All those responsible should hang their heads in absolute shame and consider their position. Personaly, I'd give them free passage, anywhere in the world, away from these shores.
It's rare for me to say this, but for once, it appears that HMRC have 'grapsed the nettle' in a genuine effort to try to steer this awful situation.

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By FactChecker
05th Jan 2024 13:16

It's not within HMRC's powers, but a fairer (and simpler) solution would have been for the govt to step in with a one-off piece of emergency legislation ... they can do it to protect GP's pensions/tax, so why not the already mistreated & abused PO workers?

Simplest of all would be to make compensation (in the Horizon-related cases) free of all tax ... but if they can't bring themselves to be belatedly magnanimous, then they could at least simply transfer liability for any penalties to the personal account of Ms Vennells and her erstwhile collaborators!

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By Postingcomments
05th Jan 2024 15:14

A drama on TV and now everyone are falling over themselves to offer some token virtue signal to the Postmasters.

No one in the "justice system" or anyone who can jail the culprits cares still. And they never will care. That's where our current system is at.

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Replying to Postingcomments:
the sea otter
By memyself-eye
05th Jan 2024 18:07

Ouch! hard judgement on the folks (on the receiving end) involved. Justice is blind- and should be, but what the PO did was unforgivable. I signed the petition to strip the former CEO of her 'gong'

You should do so too.......

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Replying to memyself-eye:
By SteveHa
06th Jan 2024 15:06

I didn't take it as "hard judgement" on the subpostmasters. Rather a comment that it takes an ITV drama and the following public outrage to prompt anyone in power to take any action at all. What has been done to help these poor folk in the past 20 years prior to the ITV drama. Sod all is what.

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Replying to memyself-eye:
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By Postingcomments
08th Jan 2024 11:23

I suspect that "justice" hangs out on the golf course (in work time!) with the bosses of big companies and agreeing not to prosecute any of their shennanigans.

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Replying to memyself-eye:
By SteveHa
09th Jan 2024 15:43

memyself-eye wrote:

I signed the petition to strip the former CEO of her 'gong'

It seems she's handed it back.

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Replying to SteveHa:
By coops456
10th Jan 2024 10:52

I don't doubt that Vennells is just one of a number of responsible people who received honours, adding insult to injury. "Handing back" her CBE is actually meaningless, as only the monarch can revoke an honour, on the advice of the Honours Forfeiture Committee
https://www.gov.uk/guidance/having-honours-taken-away-forfeiture#can-an-...

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Replying to coops456:
By SteveHa
10th Jan 2024 11:08

I spent some time last night trying to find out who nominated her. No joy.

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RLI
By lionofludesch
07th Jan 2024 17:52

Post Office still not great at handling this, are they?

This is top British management in the 2020s?

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By Davidjw29
08th Jan 2024 10:05

I have seen online that Rebecca Bennyworth and some of her associates have set up a system to offer free tax advice and tax return assistance to all sub-postmasters affected.

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By johnjenkins
08th Jan 2024 10:22

Same old, same old. Reliance on software. I had one of these sub postmasters and we knew the software was wrong. Excel spreadsheets saved the day.
What did the banks say about scams "can't be our fault our system doesn't make mistakes".
This is just the tip of the iceberg, wait till AI really gets going.
Full marks HMRC. Now there's a rarity.

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By Eric T
08th Jan 2024 11:03

I hope HMRC will be so generous when the inevitable disaster of MTD starts unravelling.

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By sumo69
08th Jan 2024 12:32

The whole of Royal Mail isn't fit for purpose - I wait 7-10 days for a postal delivery on a regular basis and have reverted to collecting "Guaranteed Next Day" packages from the sorting office as its quicker!

I had one due on a Tuesday that they didn't try and deliver once so I collected it on a Friday - they couldn't tell me why delivery hadn't been attempted.

Take the senders £8 and then don't even offer a 2nd class delivery timescale - its theft!!

And I am a shareholder.

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Replying to sumo69:
RLI
By lionofludesch
08th Jan 2024 12:56

sumo69 wrote:

The whole of Royal Mail isn't fit for purpose - I wait 7-10 days for a postal delivery on a regular basis and have reverted to collecting "Guaranteed Next Day" packages from the sorting office as its quicker!

I had one due on a Tuesday that they didn't try and deliver once so I collected it on a Friday - they couldn't tell me why delivery hadn't been attempted.

Take the senders £8 and then don't even offer a 2nd class delivery timescale - its theft!!

And I am a shareholder.

That's as may be but Royal Mail has nothing to do this Post Office Counters Ltd.

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By Open all hours
08th Jan 2024 13:06

Love the Fujitsu website. Trust is mentioned in pretty much every sentence as they invite you to join them in Davos next week.

The government should fly all the long suffering SubPostmasters across and get Sir Alan Bates to address the ‘great’ and the ‘good’.

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Replying to Open all hours:
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By johnjenkins
08th Jan 2024 13:15

Weren't Fujitsu involved in underground, overground, wombling free.

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By carnmores
08th Jan 2024 13:22

yet another example of gross incompetence and negligence. Time to restructure the board yet again.

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By moneymanager
08th Jan 2024 18:10

And they have the te my erity to call us "customers", hostages would be more apt.

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By lesley.barnes
10th Jan 2024 10:26

I started my working life on a Post Office counter at 17. Back in the day everything was manual and on a Wednesday night there was no better feeling than when the balance sheet balanced. When the Post Office Counters and Royal Mail split I went to Royal Mail and was sponsored to train as an accountant so never worked on Horizon.

I have followed the story with absolute horror. I really hope that the enquiry gets to the bottom of WHY the senior management at Post Office counters behaved like this? Were there bonuses at stake, a backdoor way of closing some Sub Post Offices for good to save money, pressure from the Government after spending tax payers money.

It makes no sense, all this data about "thefts" from sub offices would have been discussed by senior management. Someone ie Ms Vennells should have questioned why previously honest people who prior to Horizon would have had regular unannounced manual audits have suddenly become master criminals.

It's just jaw dropping.

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Replying to lesley.barnes:
By coops456
10th Jan 2024 11:06

lesley.barnes wrote:
... It makes no sense, all this data about "thefts" from sub offices would have been discussed by senior management. Someone ie Ms Vennells should have questioned why previously honest people who prior to Horizon would have had regular unannounced manual audits have suddenly become master criminals.


I totally agree. The problem is that the higher up the ladder in any organisation, the more they have "drunk the Kool-Aid" and the priority is protecting the brand or reputation of the institution over truth and transparency. Myriad examples spring to mind, from Lucy Letby's hospital trust to Exxon to Hillsborough to Met Police.

Wilful Blindness by Heffernan is an excellent read on this executive tendency to selective vision, and the importance of dissent and critical thinking. It should be required reading for all CEOs and their boards!

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