Post Office payout 100 Millions, A plan to quash hundreds of convictions based on flawed software could be facing an unexpected cost. Experts say the Post Office claimed a tax break for compensation payments, which is illegal.
The victims, many of whom have waited years for justice, were prosecuted by the Post Office over faulty Fujitsu accounting software. It ruined their lives.
Tax experts say Post Office may be insolvent
The Post Office is in big trouble and needs to get out of it. It’s losing billions of dollars each year, and its pension and retiree health care liabilities are adding up to nearly $100 trillion.
The government is putting money into the Post Office to keep it afloat, but it’s not enough. If it continues to lose money, it will eventually run out of cash and stop delivering letters. That’s why the government needs to do something radical: it must allow private companies to compete with the Post Office.
A team of eminent tax and accounting experts reviewed the Post Office’s accounts for the last ten years in detail. One thing that stood out was how the Post Office treated compensation payments to its victims. This was a blatantly unfair and unlawful practice that may have cost the Post Office a lot of money.
The victims of the Post Office Horizon scandal have described being shunned by their communities, having their lives ruined and suffering financial ruin. Some have even been driven to suicide. The Post Office has apologised for the past injustices, but it has been a long time coming. It was only in 2019 that a High Court case found that some of the convictions were wrongful, and this was upheld on appeal in 2021. The Post Office has now started the process of clearing the names of those wrongly convicted.
Post Office payout 100 Millions
But it’s not just the Post Office that has been guilty of bad behaviour. Huge sums of taxpayers’ money have been awarded to private companies without proper checks and balances in place. The TUC has argued that the outsourcing of public services should be subject to a “public interest test” and there must be clauses in contracts to protect workers.
It would be nice to think that the lessons learned from the Post Office scandal could be applied elsewhere. But if the government is unwilling to take its advice, it could end up in exactly the same mess as the US Postal Service. And that is a shame for everyone who has ever received a letter.
The Post Office’s tax position
As part of its work, Post Office workers are responsible for delivering letters to citizens across the country. They are also expected to meet their financial obligations, including paying taxes. However, it is not always clear how employees are required to comply with this obligation. This confusion stems from the fact that the Post Office is not technically a government agency. Instead, it is an “independent establishment of the executive branch of the Government.” As such, it is privileged under U.S. law to have a national monopoly on mail delivery and access to mailboxes. While the monopoly allows it to charge lower prices than private businesses, it also burdens taxpayers with huge costs.
For example, the USPS pays employees a highly generous compensation package, and it is able to deduct these payments from its corporate tax. As a result, it can effectively hide substantial profits from its annual corporate tax returns. However, under the new accounting rules, companies can only shelter profits for up to half of a current year’s earnings.
In the case of the Post Office, this means that it has a corporation tax liability of more than PS100m. It has been deducting this money from the profits of sub-postmasters who have had their theft convictions quashed, and it is alleged that this amounts to a breach of corporation tax law.
The risk of this issue was highlighted in the Post Office’s most recent accounts, which note that HMRC is investigating the company’s handling of compensation claims and provisions. It is therefore possible that the company will be required to pay back this money, and if it cannot do so it may be insolvent.
This is a serious matter that should be examined by the Government. The public deserves to know that the Post Office is treating its staff fairly and meeting its obligations under corporation tax law.
Congress should consider rewriting postal laws to remove the company’s monopoly privileges and allow it to operate like a private business. This would benefit the company by reducing costs, enabling it to compete with the expanding world of online commerce, and giving it greater flexibility in pricing, closing locations, and adjusting delivery frequency. Europe has already taken this step, and the United States should do likewise.
The Post Office’s strategy to minimise compensation
The Post Office has been accused of using its own legal resources in a way that takes advantage of unrepresented victims. Its litigation strategy in the 2010s was described by the Court of Appeal as demonstrating a “desire to take every point, regardless of its quality or consequences.” That approach appears to be continuing.
The company has been using its own legal department to push through a strategy of minimising compensation for the victims of its Horizon software disaster. The result is that fewer and fewer victims are receiving the compensation they deserve. This is despite the fact that the Post Office has a wealth of evidence to support its claim that it was not responsible for the software’s flaws, and that the problems were caused by external factors.
One of the ways it has been trying to minimise compensation is by claiming tax relief for the payments it has made to the affected postmasters. This is a highly questionable move, and could have the effect of undermining the compensation scheme itself.
UK Post Office payout
Dan Neidle, a tax lawyer, posted on X that the Post Office claimed PS934m in tax relief for its compensation payouts, and called this ‘unlawful’. This was, yet again, conduct which took advantage of unrepresented individuals, and is contrary to specific SRA guidance on Conduct in Disputes and the linked Warning Notice on SLAPPs. I have already referred this to the SRA.
It is also a deeply unfair use of the law, and the taxpayers’ money, by an organisation which is wholly owned by the Government. The tax is payable to HMRC, and the Post Office should pay it just like any other business.
Ultimately, the Government should consider setting up a quango to review all the Post Office compensation schemes/settlements. This would allow the quango to make a fresh assessment of the cases, and ensure that all eligible postmasters are receiving the full amount of compensation they deserve. This quango should also be empowered to extend the scope of the compensation scheme to cover non-financial losses, such as stress and reputational damage.
The Post Office’s legal position
Post Office staff are not government employees and therefore do not receive pay through tax dollars. Instead, they are paid through a mixture of service fees and stamp sales. These fees have declined over the years due to the declining volume of mail being delivered. As a result, the Post Office is struggling to survive.
The Post Office has adopted a strategy to minimise compensation for the worst miscarriage of justice in British history. It does this by minimising the initial claim postmasters make. This is despite the fact that the Post Office has procedures in place to ensure claims are handled fairly.
Firstly, the Post Office requires postmasters to complete a long and complex legal form with absolutely no help or guidance. This is a deliberate ploy to ensure that unadvised postmasters do not get the full amount they are entitled to. The form includes omissions and errors that would be spotted by a lawyer, but not by a layperson. Consequently, the Post Office is making sure that the overwhelming majority of postmasters will claim less than they are entitled to.
Another omission is the failure to include a box for postmasters to request ‘exemplary’ damages. This is a type of damage that may be awarded where a wrongdoer acts with malice or gross negligence. It is inconceivable that the Post Office does not realise that its own form is preventing postmasters from getting the compensation they deserve.
The final issue is that most postmasters are receiving no more than PS5,000 in compensation. Given the stress the Post Office caused, this seems utterly inadequate. Moreover, it is difficult to see how this can be justified as tax-deductible, in light of the House of Lords ruling in Strong & Co of Romsey Ltd v Woodifield (payments to compensate for breach of duty are non-deductible) and Fairrie v Hall (damages for defamation are also normally non-deductible).
This is why I am calling on the Post Office to establish a quango empowered to review every single compensation payment made under the different schemes and settlements. The quango could then make whatever additional payments it believes are appropriate under the circumstances. This could go some way to restoring the trust that was lost when over 700 postmasters were falsely accused of ‘theft and false accounting’, persecuted by police and convicted of fraud offences because Fujitsu’s software did not show them that money had gone missing from their branches.
