According to a tax specialist, the Post Office may be insolvent after claiming tax benefits for compensation payments made to post office operators.
Dan Neidle is the director of the non-profit Tax Policy Associates. He said that the Post Office claimed £934m in tax reliefs for its compensation payment and suggested that it may be illegal.
Fujitsu’s accounting software, which was faulty, led to the conviction of more than 700 postmasters.
Rishi Sunak announced days after the ITV drama Mr Bates Vs The Post Office was aired that anyone wrongly prosecuted by England and Wales would be cleared of their charges before the end the year, under a blanket law to be introduced in the next few weeks.
Neidle, as first reported, said that the Post Office treated the compensation they paid to post offices operators as a tax deductible. This is “not accurate”, adding: “You can only claim a deduction for payments ‘wholly’ and ‘exclusively’ made for the purpose of your trade.”
Some tax experts said it wasn’t clear-cut. One expert stated that a business can “generally claim tax deductions on expenses incurred which are closely related to its trade even if the payment is compensation”.
Post Office stated that the information it provided on taxation is “appropriate and accurate”.
Neidle wrote on X: “The Post Office claimed £934m in tax relief for the compensation payments it made to postmasters that were persecuted. That’s outrageous. This is also illegal – the Post Office will now be hit with an unexpected tax bill of £100m. It could be insolvent.
“Our team comprised of tax and accounting experts examined the Post Office’s financial statements for the past 10 years and found one problem: the compensation paid to postmasters was tax-deductible. This is incorrect.
HMRC has confirmed that they are investigating the Post Office and that it owes taxes. We believe that this is the right thing to do.
Liam Byrne said that it was “another shock story” regarding the state-owned firm.
Byrne is a Labour MP who told BBC Radio 4 Today: “It seems like the Post Office has almost done it again, by underpaying taxes and paying their bosses more than they should.
“It appears that they have crystallised the losses from past sins, and set them against current accounts. But they wanted to avoid the impact on the bonuses of the management team.” “I’m not certain you can have both.”
The committee will ask about tax relief when it questions Nick Read, the chief executive of the Post Office, and Paul Patterson, the head of Fujitsu Europe.
HMRC refused to confirm or deny the existence of any investigations, and stated that it would not make comments about identifiable taxpayers.
Post Office spokesperson: “The information disclosed on taxation in Post Office annual report and accounts published on 20 December, 2023 is accurate and appropriate.”
“We have regular discussions with the government, who is our sole shareholder. Our correspondence on this issue was to ensure that the tax treatment for funding we receive from the government to pay compensation would be treated the same as other government funding.”