Post Office scandal: could Post Office face 'insolvency' - what have tax experts said about Horizon scandal?

The Post Office could be facing a £100 million bill and insolvency after claiming tax relief for its compensation payments, according to a tax expert.

The Post Office scandal saw more than 700 subpostmasters and subpostmistresses wrongly accused of theft and handed criminal convictions after the faulty accounting software Horizon made it appear as though money was missing was their accounts.

There are three compensation schemes for those impacted by the scandal, with Dan Neidle, the head of non-profit organisation Tax Policy Associates, saying that the Post Office had claimed £934m in tax relief for these payments, suggesting it could be “unlawful”.

The Post Office scandal has been making headlines after the ITV drama Mr Bates vs The Post Office depicted the true story of subpostmaster Alan Bates and his fight for justice. Following the public outcry Prime Minister Rishi Sunak announced that the wrongly prosecuted in England and Wales could have their names cleared by the end of the year.

But, what have tax experts said about the Post Office and will it face insolvency? Here's everything you need to know.

What have tax experts said about the Post Office scandal?

Neidle has stated that the Post Office treating the compensation as tax deductible is "not correct". First reported by Financial Times, Neidle explained: "you only get a tax deduction for payments made ‘wholly and exclusively’ for the purposes of the trade".

Neidle posted on X 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."

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

What have the Post Office said?

The Post Office have said its disclosed information on taxation was “appropriate and accurate”. A 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."

They continued: “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.”

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