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This guidance note looks at the various tax exemption available in respect of compensation received by sub-postmasters as a result of the Post Office Horizon scandal.

Issues first arose in 1999 (see ‘Background to Post Office Horizon scandal’). Compensation started to be awarded from 2015 onwards. Tax exemptions for specific compensation packages have subsequently been brought in through statutory instruments in 2023 and 2024.

This timescale of 25 years presents challenges. Delays to compensation awards and the need to submit tax returns including taxable compensation, brings further challenges. The response to the scandal has been piecemeal, both in terms of compensation awards and tax exemptions.

It is necessary to understand the circumstances in which compensation has arisen, and the exact nature of the payments, in order to be confident of the correct tax treatment. The sections below set out the context, complexities, development and the exemptions available.

From a tax viewpoint, there are a number of complexities. These are considered below:

1. •

   background

2. •

   business structure

3. •

   taxation and entitlement to compensation

4. •

   nature of compensation and