Horizon: The 20-year accounting software scandalby
The saga of the Post Office Ltd Horizon accounting system spans more than two decades. This chronology tracks how the Horizon scandal played out on the pages of AccountingWEB since the system was introduced in 2000.
Labelled by The Guardian as “one of the biggest miscarriages of justice in British legal history”, the Horizon affair has rumbled on for more than 20 years, ensnaring as many as 900 subpostmasters in legal cases and claims that led to financial ruin, prison and in some cases suicide.
Stemming from unreliable software installed in sub-post office branches during the late 1999s, the UK’s largest and longest-running public sector technology scandal was recently serialised as a drama for ITV, resulting in a wave of publicity and calls for all Post Office staff wrongly accused of theft and false accounting to have their convictions overturned.
In this updated timeline, AccountingWEB tracks the Horizon case as accountants experienced it in the AccountingWEB archives and beyond. It was first published in April 2021 and draws heavily on the work done by AccountingWEB’s former editor John Stokdyk before he died in 2023.
Post Office first introduced its new Horizon computer system to its network of UK sub post offices. The software had been developed by IT giant Fujitsu. A senior developer who worked on the initial project before it went live told Computer Weekly in an interview in 2021 that in the months leading up to its launch, Horizon’s problems were well known inside Fujitsu.
Commenting in the wake of the Court of Appeals decision last week, AccountingWEB member hfiddes recalled: “I remember signing a petition in support of our longstanding local postmaster in East Twickenham when he lost his job around 2002… That was when the local MP and newspaper got involved, but it puzzled me at the time how it took years for wider support to build so it got to court cases etc.”
In subsequent years, more and more cases emerged elsewhere in local media, but were rebuffed as isolated cases by Post Office, which pursued any incidents where the takings of sub post offices varied from the Horizon figures as “false accounting”.
The Justice for Subpostmasters Alliance (JFSA) was founded in 2009 to help subpostmasters and mistresses who were afraid to go public with information or problems with Horizon for fear of prosecution.
In June 2012, Post Office appointed external investigators, forensic accountants Second Sight to examine the allegations.
January – Working with Second Sight, JFSA issued a call for evidence to be collected in confidence to feed into the independent examination.
July – Second Sight’s interim report found no evidence of systemic problems with the core software, but it did find evidence of internal bugs. On two occasions in 2011 and 2012, “defects” in Horizon resulted in a shortfall of about £9,000 at 76 branches. Post Office took a year to realise that the second computer defect had happened.
Frenkels Forensics partner Vivian Cohen told AccountingWEB that he had represented a subpostmaster in court and argued that Horizon wasn’t always reliable and other people in Post Office could enter transactions besides his client. The subpostmaster got a suspended sentence. “People can be sent to prison quite often on the basis of a computer error,” said Cohen.
Post Office later made good the losses arising from the bugs that Second Sight identified and the subpostmasters were not held liable. Though relatively benign in its findings, the interim report raised enough doubts to mark the turning point of the Horizon saga. [DW1]
September – After the full Second Sight report into Horizon was leaked, David Winch commented on AccountingWEB: “I have come across criminal prosecutions of postmasters/postmistresses in respect of apparent shortfalls arising from comparison of Horizon figures and actual cash and stocks… Of course it is absolutely routine for wrongdoers to deny wrongdoing – but the number of these instances in Post Offices is disturbing.”
Friction developed between Second Sight and its client after the accountants claimed Post Office withheld relevant documents. Post Office terminated the accountants’ contract and disbanded the working party. Second Sight nonetheless produced a confidential report.
In extracts from the Second Sight report obtained by BBC reporter Nick Wallis, the forensic accountants concluded that the design objective of producing a clear transactional audit trail allowing easy investigation of any errors “had not always been achieved”.
Post Office rebuffed the findings and denied any suggestion it improperly withheld information from the accountants or that the Horizon system suffered serious deficiencies. In a counter-report on its website, Post Office said “an exhaustive and informative process” confirmed there were “no system-wide problems with our computer system and associated processes”.
The Parliamentary select committee for Business, Innovation & Skills (BIS) investigated the affair and warned the secretary of state about a “lamentable lack of information provided to Second Sight” and urging the government to investigate these concerns.
Although numerous Horizon cases were in progress and sub-judice, the BIS select committee undertook an inquiry on the future of the Post Office network.
June – Publishing its findings, the BIS select committee chair commented, “If the government is really committed to taking action that delivers for the victims of this scandal it should bring forward a judge-led public inquiry.”
11 December - Post Office agreed a settlement with a group of 550 claimants in which chairman Tim Parker apologised: “In the past, we got things wrong in our dealings with a number of postmasters.” The undertaking to “reset” the organisation’s relationship with postmasters was accompanied by a £57.75m payment. After allowing for the costs of fighting the case, the claimants are likely to share £10m – less than £20,000 each.
16 December – In a verdict in favour of the subpostmasters’ association (Bates vs Post Office  EWHC 3408 (QB)), Mr Justice Fraser ripped into Post Office’s evidence and concluded: “Horizon was not remotely robust. The number, extent and type of impact of the numerous bugs, errors and defects that I have found… makes this clear.”
He added that Post Office’s continual attempts to play down the evidence from postmasters demonstrated “a simple institutional obstinacy or refusal to consider any possible alternatives to their view of Horizon, which was maintained regardless of the weight of factual evidence to the contrary… This approach by Post Office has amounted, in reality, to bare assertions and denials that ignore what has actually occurred… It amounts to the 21st-century equivalent of maintaining that the earth is flat.”
March – Following the conclusion of the Commons business committee investigation and the 2019 civil claims, the Criminal Cases Review Commission (CCRC) referred the cases of 42 convicted Post Office Ltd employees to the Court of Appeal on the grounds of abuse of process. They included subpostmasters, subpostmistresses, managers and counter assistants.
Second Sight’s Ian Henderson and Ron Warmington told the Commons investigation how Post Office had thwarted their investigation. “We identified evidence of flaws and bugs in Horizon. We also heard direct evidence of Post Office or Fujitsu altering transactions and balances without the knowledge of subpostmasters. Not only did Post Office refuse to accept that, but they refused to supply to Second Sight the documents that would enable us to investigate that issue,” said Henderson.
April – On Friday 23 April 2021, the Court of Appeal overturned the convictions of 39 subpostmasters on charges of theft, fraud and false accounting arising from discrepancies logged on the Post Office’s Horizon accounting system. In their written summary of the case, the judges said the failures of investigation and disclosure were “so egregious as to make the prosecution of any of the Horizon cases an affront to the conscience of the court”.
At the time, Post Office had the power to prosecute its operators. By refusing to acknowledge known bugs in the Horizon system and treating shortfalls from an unreliable accounting system as an incontrovertible loss, Post Office Limited reversed the normal burden of proof and insisted the accused prove there had been no losses, the judges noted.
“Defendants were prosecuted, convicted and sentenced on the basis that the Horizon data must be correct, and cash must therefore be missing, when in fact there could be no confidence as to that foundation.”
Several AccountingWEB members took the opportunity to offer their perspective on the case in Any Answers.
An inquiry into the scandal was established in non-statutory form in September 2020, and first took evidence in January 2021. Following the overturning of convictions in April 2021 as listed above, the inquiry was converted to a statutory basis on 1 June 2021, meaning witnesses can now be compelled to give evidence.
July 2021: The government announced that wrongly convicted subpostmasters would receive interim compensation of up to £100,000.
February 2022: Subpostmasters and mistresses wrongly convicted of fraud and fired from their jobs based on evidence from a faulty computer system started to give evidence at the public inquiry. Baljit Sethi was the first witness to present his case. Sethi, a former banker, spent 19 years successfully running a branch in Romford, Essex keeping manual records. Following the installation of the Horizon system, Sethi was told he must cover a shortfall of more than £17,000 or risk prosecution. He was able to challenge the claim due to the lack of scrutiny over audit, but had his contract terminated. Sethi was made insolvent and had to seek an individual voluntary arrangement that prevented him from getting work or opening a bank account. “I fell into a deep depression and seriously considered suicide,” he said.
On Any Answers, AccountingWEB members also debated why the accountants for the Post Office businesses that were prosecuted hadn’t identified the problem.
July 2022: Since the Court of Appeal started setting aside convictions in April 2021, two different compensation schemes were established to cater for those who had settled without going to court and those who had been improperly convicted. However, the National Federation of Subpostmasters told a Parliamentary inquiry that tax could be due on compensation. Post Office told recipients to seek tax advice but did not provide any assistance beyond that.
One AccountingWEB member reported their subpostmaster client had received £50,000 in historical compensation made up of £27,800 shortfall losses, £12,500 for distress and inconvenience, and £14,000 in interest, which has already had tax deducted at 20%. “I am wondering if the £27,800 shortfall losses is taxable?” they asked.
March 2023: Tax barrister and campaigner Dan Neidle raised the alarm over the unfair tax treatment of compensation payments made to more than 2,000 subpostmasters and subpostmistresses who were wrongly prosecuted.
In a post highlighting the plight of the Horizon victims, Neidle pointed out that the larger, more recent lump-sum payments for loss of earnings were putting the recipients into the top tax bracket. A postmaster on £30,000pa would normally take home around £25,000 after tax, he explained. If they get 10 years’ worth of earnings in one payment, they would take home £170,000 rather than £250,000. Compressing the payouts into one year would cost the recipient £80,000.
“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,” Neidle wrote.
June 2023: Post Office executives were ordered to pay back bonuses they incorrectly received regarding the investigation of the Horizon IT miscarriage of justice after it emerged some victims had lost chunks of their compensation to tax.
Post Office also announced that it would be making top-up payments to subpostmasters in the historical shortfall scheme (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.
1 January 2024: Part one of Mr Bates vs the Post Office, a four-part drama based on the events of the Horizon scandal, is broadcast on ITV, with the other three episodes following on consecutive evenings. At the time of writing it is the UK’s most-watched programme of 2024, with the series streamed 12.3m times in just eight days. It is reported that more than 50 new victims came forward after its broadcast. AccountingWEB members were among those who watched the programme and discussed it in this Any Answers thread.
5 January 2024: Post Office had still not met its commitment to pay top-up payments relating to the HSS late in the tax year to a sizable number of subpostmasters. HMRC confirmed that it will cancel penalties and interest for subpostmasters unable to meet their self assessment and tax payment deadlines due to the late top-up payments.
8 January 2024: A team of tax experts, mobilised by chartered accountant, tax writer and lecturer Rebecca Benneyworth, banded together to offer free-of-charge advice to subpostmasters who have received compensation from Post Office and are worried about their tax position. Their website is now live at subpostmasterstax.org.uk.
9 January 2024: Paula Vennells, Post Office chief executive between 2012 and 2019 (and before that group network director from 2007) handed back her CBE following mounting public pressure. “I am truly sorry for the devastation caused to the subpostmasters and their families,” she said in a statement.
10 January 2024: Prime minister Rishi Sunak announced new legislation “to make sure those convicted are swiftly exonerated and compensated”. Government officials said the bill would be introduced “within weeks” to grant the acquittal this year.
10 January 2024: Audit experts told AccountingWEB that EY, the Big Four firm responsible for auditing Post Office throughout the Horizon scandal, had ‘awkward questions’ to answer about its failure to ask pertinent questions.
12 January 2024: A report published by Tax Policy Associates stated that Post Office may owe £100m in tax after incorrectly deducting compensation payments to subpostmasters in the Horizon scandal.
16 January 2024: Appearing before a committee of MPs, Fujitsu’s European director Paul Patterson apologised to the more than 900 subpostmasters wrongly prosecuted due to fundamental errors in its software. Patterson admitted that the Japanese software house knew about bugs and glitches in the system even before it was rolled out to Post Office branches in 1999, and stated that Fujitsu had a ‘moral obligation’ to contribute to Post Office scandal compensation.
Looking back over the chronology, longstanding Horizon-watcher David Winch told AccountingWEB: “Because postmasters were contractually obliged to make good certain shortfalls pretty much immediately out of their own pocket, some of them resorted to manipulating the figures to hide the shortfall. They may well have considered that – given a bit of time – they could work out what had gone wrong and correct it.
“As things turned out they were not able to resolve the conundrum at the time and when the Post Office auditors turned up they were shown to have manipulated the figures. So they were prosecuted and convicted of ‘false accounting’ for that manipulation – not for theft of cash.
“Since these postmasters did manipulate the figures, they did ‘gain’ in the sense that it delayed them having to pay up to cover the system shortfall and many of them did plead guilty to ‘false accounting’ at trial. One might expect that in these cases the Court of Appeal would have concluded that the convictions should be upheld.”
As things turned out, the Court of Appeal quashed these convictions – as well as the theft convictions – because it held that Post Office Ltd knew there were bugs with Horizon, but nevertheless insisted that the Horizon data was wholly reliable and accurate, when it had a legal duty to disclose to the defence any information which might assist the defence. As a consequence, these defendants did not get a fair trial and their convictions must be overturned.
“The only convictions not overturned were three cases in which the Court of Appeal found that Horizon data had not been an essential ingredient in the prosecution case,” said Winch.
This level of criticism of a prosecutor happens only very rarely in the appeal courts, he added.