The Post Office Horizon Shortfall Scheme Top-Up Payments (Tax Exemptions) Regulations, SI 2023/772, specify that horizon shortfall scheme top-up payments are qualifying payments for the purposes of FA 2020 Sch 15 paras 3 and 4 (Sch 15 provides relief from tax for qualifying payments). Horizon scheme compensation payments are taxable in the tax year in which they are paid, resulting in individuals becoming liable to tax at higher rates. The top-up payments aim to put individuals in the position they would have been in had they earned equivalent amounts spread over several years (in essence, refunding any extra tax they incurred). These new regulations make sure that the top-up payments themselves are not taxable – which Dan Neidle of Tax Policy Associates, who has been campaigning on this issue, said was ‘great news’. The regulations come into force on 1 August 2023.
The top-up payments are also to be disregarded in the calculation of earnings for NICs purposes, as provided by the Social Security (Contributions) (Amendment No 5) Regulations, SI 2023/773.
The Post Office Horizon Shortfall Scheme Top-Up Payments (Tax Exemptions) Regulations, SI 2023/772, specify that horizon shortfall scheme top-up payments are qualifying payments for the purposes of FA 2020 Sch 15 paras 3 and 4 (Sch 15 provides relief from tax for qualifying payments). Horizon scheme compensation payments are taxable in the tax year in which they are paid, resulting in individuals becoming liable to tax at higher rates. The top-up payments aim to put individuals in the position they would have been in had they earned equivalent amounts spread over several years (in essence, refunding any extra tax they incurred). These new regulations make sure that the top-up payments themselves are not taxable – which Dan Neidle of Tax Policy Associates, who has been campaigning on this issue, said was ‘great news’. The regulations come into force on 1 August 2023.
The top-up payments are also to be disregarded in the calculation of earnings for NICs purposes, as provided by the Social Security (Contributions) (Amendment No 5) Regulations, SI 2023/773.
