(qlmbusinessnews.com Mon, 15th Jan, 2024) London, UK —
Tax Experts Warn Post Office Faces Insolvency Over Alleged £100m Evasion Tactics
In a concerning development, tax experts suggest that the Post Office might have evaded over £100 million in taxes by offsetting payments to Horizon scandal victims against its profits. This controversial move, if proven, could constitute a legal violation and put the Post Office at the risk of insolvency, warns Dan Neidle from Tax Policy Associates. Additionally, there are concerns that senior executives may have been overpaid.
The Post Office, currently compensating sub-postmasters whose theft convictions were overturned, maintains that its financial reporting is accurate and fitting. However, experts point out that claiming tax relief for compensations related to unlawful acts is generally not permissible.
Dan Neidle states, “The non-deductibility of compensation for unlawful acts is a well-known point.” Heather Self from Blick Rothenberg concurs, emphasizing the challenge in justifying these compensations as business expenses.
HMRC is actively investigating the Post Office's accounting practices concerning compensation payments and provisions. In the latest financial accounts, the company acknowledges the risk of an adverse tax ruling, stating, “the Directors recognize that an adverse outcome could be material.”
Dan Neidle estimates that deducting compensation from the Post Office's trading profit may have resulted in an underpayment of over £100 million in corporation tax. This potential tax bill, if demanded by HMRC, could render the Post Office technically insolvent, requiring government intervention.
While the Post Office remains government-owned, imposing financial penalties essentially amounts to the government fining itself. Despite these challenges, the Post Office asserts the appropriateness and accuracy of its financial information. Discussions with HMRC and the Department for Business and Trade are ongoing.
Furthermore, concerns arise about executive pay calculations. It appears that while compensations were subtracted from taxable profits, they were ignored in determining executive pay. This discrepancy has led to inflated executive pay based on a measure the Post Office terms “trading profit.”
Chief Executive Nick Read, for instance, received a salary of £436,000 and a bonus of £137,000, benefiting from an allegedly inflated trading profit.
Dan Neidle comments on this, saying, “Bonuses have been paid to the executive team based on an apparent level of profitability which does not exist. If a public company missed an obvious tax point that made the business insolvent, the shareholders would be demanding the CFO and CEO's head on a platter.”
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