The Post Office could be facing a £100m bill and insolvency after claiming a tax break for compensation payments to sub-postmasters, a leading expert has told Sky News.
Dan Neidle, the head of non-profit organisation Tax Policy Associates, said the Post Office had wrongly claimed relief on the £934m damages provision.
The tax lawyer argued such deductions could not be made for “unlawful” activities.
Mr Neidle also suggested the amount of tax owed by the Post Office could grow further and called for the clawback of bonuses to senior Post Office managers.
The Horizon scandal saw hundreds of sub-postmasters wrongly convicted after faulty Fujitsu accounting software made it appear as though money was missing at their branches.
The Post Office also forced at least 4,000 branch managers pay back cash based on the flawed data.
Mr Neidle said: “There was a mysterious disclosure in this year’s accounts saying they were discussing something with HMRC and we dug through the accounts and we found that they’d created a provision in the accounts for compensation to postmasters of £934m.
“They then claimed a tax deduction for the £934m.
“Now you can’t do that.
“You can claim a tax deduction for things that you do in the course of your trade, your expenses of your normal business.
“But you can’t claim a tax deduction for things which are unlawful, illegal or outside the trade, like persecuting 4,000 postmasters.
“So that £934m should never have been claimed as a tax deduction.”
He added: “Now if I told you I was in discussions with HMRC about £100m of tax that I might owe, I think you’d know that they weren’t pleasant discussions over tea. It’s an investigation.”
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Mr Neidle also believed the Post Office’s tax bill could increase even more.
He said: “For example, what about all the money they claimed back from postmasters that they said postmasters had stolen and they hadn’t, did the Post Office pay tax on that income?
“What about all the expenses of prosecuting these poor postmasters? Bet they claimed the deduction for that – they shouldn’t have done.
“What about the legal claims they fought for years using the most ruthless and unethical tactics? Should the Post Office have got a tax deduction for that?
“Now, if this was a normal company, HMRC would be all over them, pushing every point as far as it could, and I very much hope they’re doing the same here.”
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He argued top executives should now be forced to pay back their bonuses.
Mr Neidle said: “You have an executive team who’ve boasted about the Post Office becoming profitable.
“One third of their bonus package is linked to that profitability and actually the Post Office was never profitable at all.
“Actually, they had a huge tax black hole in their accounts, which they failed to disclose for years, which they smuggle out in very, very elliptical disclosure in this year’s accounts.
“And their own remuneration policy, says that in such circumstances, bonuses should be clawed back. Well, they should be thinking about that.”
An HMRC spokesperson said: “We collect the tax due under the law, creating a level playing field for everyone and funding public services.”
A Post Office spokesperson said: “The disclosed information on taxation in Post Office’s Annual Report and Accounts for 2022/23, published on 20 December 2023, is appropriate and accurate.
“We have regular conversations with government who are our sole shareholder and our correspondence in respect of this issue was about ensuring that the tax treatment of funding we receive from government to pay compensation was treated in the same way as other government funding that we receive.”
Days after the ITV drama Mr Bates vs The Post Office aired, Prime Minister Rishi Sunak announced that the wrongly prosecuted in England and Wales could have their names cleared by the end of the year under blanket legislation to be introduced within weeks.
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