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Post office compensation - what’s the latest?

Compensation ins and outs. We recently told you about the tax rules for business compensation payments ( yr.24, iss.8, pg.2 , see The next step ) in light of the Post Office Horizon scandal. The tax treatment for the recipients of compensation is now the subject of new legislation.

Special exemption. The government has confirmed that there will be no income tax, capital gains tax, NI contributions, corporation tax or inheritance tax liabilities for postmasters past and present who receive a compensation payment. The exemption will apply to postmasters whose convictions are overturned or who receive the £75,000 fixed sum payment under the Horizon shortfall scheme.

Compensation generally. The exemption will require new legislation which won’t change the existing rules for compensation payments to employees or other workers. These can be outside the scope of tax and NI but can be taxable depending on the precise reason for the payment and how it’s paid. As an employer you should continue to follow the current rules and guidance (see The next step ).

For a previous article on compensation payments and links to HMRC’s guidance, visit https://www.tips-and-advice.co.uk , Download Zone, year 24 issue 13.