HMRC have confirmed that, where Horizon Shortfall Scheme (HSS) top-up payments are not made ‘in good time’ for the recipient to file a self-assessment tax return by 31 January 2024, no late-filing or late-payment penalties (or interest) will be charged. This will also apply where the £300 ‘tax advice grant’ has not been received in good time. HMRC have also set up a dedicated helpline for affected individuals.
The guidance says that no penalties or interest will be applied where the tax return is not filed on time for the above reasons, implying that this will be the case where an individual also has other income and gains that need to be included in the return.
Shortfall payments were made to those who had made good the apparent losses caused by the Horizon software failures out of their own pockets. Those payments were taxable, and recipients would need to report the payments in a self-assessment tax return.
In June 2023, the UK government acknowledged that the shortfall payments made to former branch managers (‘subpostmasters’) should not be ‘unduly reduced by tax’. Large compensation payments were being paid in a single lump sum in one tax year, thereby attracting income tax at the higher and in some cases the additional rate of tax. For example, 10 years’ worth of compensation for loss of earnings based on a gross annual salary of £30,000 would result in £300,000 being subject to income tax in one tax year, leaving the individual substantially out of pocket.
HSS top-up payments were introduced to put recipients in the position they otherwise would have been in, had the original shortfall payments been taxed at the expected rates. Tax Policy Associates discuss a number of potential issues with the way the HSS payments have been made.
The top-up payments themselves are exempt from income tax courtesy of the Post Office Horizon Shortfall Scheme Top-Up Payments (Tax Exemptions) Regulations, SI 2023/772.
It is also worth noting that compensation payments made under the Group Litigation Order compensation scheme (Bates and Others v Post Office Ltd [2019] EWHC 606 (QB) – given mainstream media attention following the ITV series ‘Mr Bates vs The Post Office’) were calculated based on after-tax income and were then made subject to an explicit tax exemption (by SI 2023/184), which avoided the particular problems that have arisen with the HSS payments.
HMRC have confirmed that, where Horizon Shortfall Scheme (HSS) top-up payments are not made ‘in good time’ for the recipient to file a self-assessment tax return by 31 January 2024, no late-filing or late-payment penalties (or interest) will be charged. This will also apply where the £300 ‘tax advice grant’ has not been received in good time. HMRC have also set up a dedicated helpline for affected individuals.
The guidance says that no penalties or interest will be applied where the tax return is not filed on time for the above reasons, implying that this will be the case where an individual also has other income and gains that need to be included in the return.
Shortfall payments were made to those who had made good the apparent losses caused by the Horizon software failures out of their own pockets. Those payments were taxable, and recipients would need to report the payments in a self-assessment tax return.
In June 2023, the UK government acknowledged that the shortfall payments made to former branch managers (‘subpostmasters’) should not be ‘unduly reduced by tax’. Large compensation payments were being paid in a single lump sum in one tax year, thereby attracting income tax at the higher and in some cases the additional rate of tax. For example, 10 years’ worth of compensation for loss of earnings based on a gross annual salary of £30,000 would result in £300,000 being subject to income tax in one tax year, leaving the individual substantially out of pocket.
HSS top-up payments were introduced to put recipients in the position they otherwise would have been in, had the original shortfall payments been taxed at the expected rates. Tax Policy Associates discuss a number of potential issues with the way the HSS payments have been made.
The top-up payments themselves are exempt from income tax courtesy of the Post Office Horizon Shortfall Scheme Top-Up Payments (Tax Exemptions) Regulations, SI 2023/772.
It is also worth noting that compensation payments made under the Group Litigation Order compensation scheme (Bates and Others v Post Office Ltd [2019] EWHC 606 (QB) – given mainstream media attention following the ITV series ‘Mr Bates vs The Post Office’) were calculated based on after-tax income and were then made subject to an explicit tax exemption (by SI 2023/184), which avoided the particular problems that have arisen with the HSS payments.
