Two new sets of regulations have been made to address some of the tax issues surrounding compensation payments made to sub-postmasters in relation to the Post Office Horizon IT system scandal.
The Post Office Horizon Compensation and Infected Blood Interim Compensation Payment Schemes (Tax Exemptions and Relief) Regulations, SI 2023/184, introduce tax exemptions for three categories of compensation payments, as follows:
Overturned Historical Conviction compensation payments: these are payments made to individuals whose criminal convictions were quashed, following the Horizon system debacle. Payments are exempt from income tax, capital gains tax and inheritance tax from 22 July 2021.
Post Office Group Litigation Order compensation payments: these are extra payments for those who took part in the original legal action in relation to the Horizon failures and whose original compensation was swallowed up by legal fees. Payments are exempt from income tax and capital gains tax from 1 August 2022.
Infected Blood Scheme compensation payments: payments are exempt from income tax, capital gains tax and inheritance tax from 28 October 2022.
The Social Security (Contributions) (Amendment) Regulations, SI 2023/186, provide the equivalent disregard from earnings for NICs purposes for the two Post Office schemes.
These exemptions do not, however, appear to cover settlements under the Post Office Historical Shortfall Scheme, although Kevin Hollinrake, Minister at the Department for Business and Trade, recently tweeted that the government is ‘working on a solution’.
Two new sets of regulations have been made to address some of the tax issues surrounding compensation payments made to sub-postmasters in relation to the Post Office Horizon IT system scandal.
The Post Office Horizon Compensation and Infected Blood Interim Compensation Payment Schemes (Tax Exemptions and Relief) Regulations, SI 2023/184, introduce tax exemptions for three categories of compensation payments, as follows:
Overturned Historical Conviction compensation payments: these are payments made to individuals whose criminal convictions were quashed, following the Horizon system debacle. Payments are exempt from income tax, capital gains tax and inheritance tax from 22 July 2021.
Post Office Group Litigation Order compensation payments: these are extra payments for those who took part in the original legal action in relation to the Horizon failures and whose original compensation was swallowed up by legal fees. Payments are exempt from income tax and capital gains tax from 1 August 2022.
Infected Blood Scheme compensation payments: payments are exempt from income tax, capital gains tax and inheritance tax from 28 October 2022.
The Social Security (Contributions) (Amendment) Regulations, SI 2023/186, provide the equivalent disregard from earnings for NICs purposes for the two Post Office schemes.
These exemptions do not, however, appear to cover settlements under the Post Office Historical Shortfall Scheme, although Kevin Hollinrake, Minister at the Department for Business and Trade, recently tweeted that the government is ‘working on a solution’.
