Post Office may have underpaid £100m in tax while overpaying bosses, says tax expert

Dan Neidle, tax lawyer, says the Post Office claimed £934m tax relief for its pay outs to wronged postmasters

The Post Office may have underpaid more than £100million in tax while overpaying senior bosses, according to a tax expert.

Dan Neidle, the head of non-profit organisation Tax Policy Associates, suggested that the Post Office had paid less tax by deducting payments to victims of the faulty Horizon IT system from its profits.

He said the Post Office claimed £934m tax relief for its compensation payments, and suggested it could be “unlawful”.

The Horizon scandal saw more than 700 subpostmasters and subpostmistresses handed criminal convictions after faulty Fujitsu accounting software made it appear as though money was missing at their branches.

Labour MP Liam Byrne reacted to the news saying it looked like the Post Office had been “double crossing the country again”. The Post Office said its accounts were “appropriate and accurate”.

Following the success of an ITV drama about the scandal, Prime Minister Rishi Sunak announced that the wrongly prosecuted postmasters in England and Wales could have their names cleared by the end of the year under blanket legislation to be introduced within weeks.

As first reported by the Financial Times, Mr Neidle said the Post Office has treated the compensation it pays to postmasters as tax deductible, which is “not correct”, adding “you only get a tax deduction for payments made ‘wholly and exclusively’ for the purposes of the trade”.

Other tax experts told the FT it was not clear cut, with one saying a business “can generally claim tax deductions for expenses incurred that are closely connected with its trade, even if it is a compensation payment”.

Mr Neidle posted on X, formerly Twitter, saying: “The Post Office claimed £934m tax relief for its compensation payments to the postmasters it persecuted. That’s outrageous. It’s also unlawful – so the Post Office now faces an unexpected £100m tax bill. It may be insolvent.

“Our team of eminent tax and accounting experts reviewed the Post Office’s accounts for the last ten years in detail and one issue stood out: it has treated the compensation it pays to postmasters as tax deductible. That is not correct.

“A source at the Post Office has confirmed to us that HMRC is investigating this and asserting that the Post Office owes tax – in our view they are right to do so.”

HMRC would not confirm or deny investigations and said it would not comment on identifiable taxpayers.

The Post Office appears to have ignored the impact of compensation payments on profits when calculating the pay of their senior bosses, Mr Neidle said.

Senior executives’ bonuses are determined by looking at “trading profit”, which excludes the money used to pay victims of the Horizon scandal.

Chief executive Nick Read was paid £436,000 in 2022, with an added bonus of £137,000.

Liam Byrne MP told the BBC: “The public and parliament is going to ask what on earth is going on at the Post Office, because it looks like we’ve almost got the Post Office double crossing the country again - by underpaying their taxes and overpaying their bosses”.

A Post Office spokesperson said: “The disclosed information on taxation in Post Office’s Annual Report and Accounts for 2022/23, published on 20 December 2023, is appropriate and accurate.

“We have regular conversations with Government who are our sole shareholder and our correspondence in respect of this issue was about ensuring that the tax treatment of funding we receive from government to pay compensation was treated in the same way as other government funding that we receive.”