Clause 12 - Relief for payments of compensation by government etc to companies

Finance Bill – in a Public Bill Committee at 10:00 am on 16 January 2024.

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Question proposed, That the clause stand part of the Bill.

Photo of Nigel Huddleston Nigel Huddleston The Financial Secretary to the Treasury

I should probably explain to anybody wondering about the musical chairs that we have two Ministers here, because the clauses are split across ministerial responsibilities. I explain that for Members and anybody watching—the millions who, I am sure, are watching on television across the world.

Clause 12 is on a very important and newsworthy point, but it also shows that the matter that it deals with has received considerable attention for some time: it makes changes to ensure that all claimants of compensation from a range of Post Office schemes related to the Horizon IT scandal are treated similarly. It will align the tax treatment to ensure that claimants who chose to set themselves up as companies obtain tax relief comparable to that available for claimants set up as individuals.

Following the Horizon IT scandal, a number of schemes were set up to provide compensation to the individuals affected, and although most sub-postmasters are individuals, some set themselves up as corporate entities. Individuals have been exempted from paying income tax, national insurance contributions and capital gains tax on compensation that they received under the schemes that have been announced, which are being legislated for separately, but the Government are determined that postmasters affected by the Horizon IT scandal will receive the compensation that they deserve, regardless of how they arrange their business structure. The clause therefore exempts from corporation tax compensation payments made under the Post Office historical shortfall scheme, the group litigation order schemes, the suspension remuneration review and the Post Office process review scheme. The legislation will align the taxation of onward payments of compensation with that of compensation to individual recipients.

The clause will impact the relatively small proportion of compensation recipients who are structured as corporate entities, but to those impacted it is extremely meaningful. The approach taken in the legislation is consistent with tax principles and precedents, as well as the tax treatment of separate Post Office compensation schemes set up in response to the Horizon IT scandal.

Photo of Tulip Siddiq Tulip Siddiq Shadow Minister (Treasury)

I would like to spend a long time debating the claim that business is fearful of the Opposition, but I do not feel that this is the right time.

Photo of Tulip Siddiq Tulip Siddiq Shadow Minister (Treasury)

Given the shocking details of the Post Office scandal, which has rightly been the subject of significant parliamentary debate in the last few days, it will come as no surprise that the Opposition strongly support the measures in clause 12, which is designed to bring parity to the taxation of compensation payments received by all sub-postmasters who were victims of that shameful episode. It is quite plainly unjust for sub-postmasters structured as a corporate entity to receive less in compensation than individual claimants, or for that compensation to disappear back to the Exchequer through tax on onward payments to the directors of those entities, who are the victims.

The clause also rightly addresses the inexplicable difference that there has been in tax treatment depending on the route that victims have taken to seek damages from the Post Office, be it through the group litigation order scheme, the Horizon shortfall scheme, the suspension remuneration scheme or the Post Office process review scheme. I thank the campaign groups, such as Tax Policy Associates, that have led the charge over the past year for their dogged efforts to highlight the outrageous proportion of sub-postmaster compensation that was set to disappear in tax. Given last week’s welcome announcement from the Prime Minister that all victims of the Post Office scandal will now be exonerated and compensated in full, it is even more critical that the tax exemptions in clause 12 are implemented at pace. More broadly, the Government must ensure that the complexities of taxing compensation are not allowed to stand in the way of delivering justice to victims of future scandals. We will not oppose the clause.

Photo of Drew Hendry Drew Hendry Shadow SNP Spokesperson (Economy)

It is a pleasure to serve under your chairmanship, Mr Paisley. Justice, accountability and compensation for those affected and wronged are required at speed on all aspects of the Post Office-Fujitsu-Horizon scandal. That is why we will support clause 12: to ensure that the fullest possible reparations are made to those who suffered through false accusation, incarceration and worse. The scandal has gone on for far too long, and highlights the worst of Westminster’s indifference and delay, even when presented with overwhelming evidence of wrongdoing. That, along with all other aspects of the scandal, must be dealt with as quickly and thoroughly as possible.

Photo of Nigel Huddleston Nigel Huddleston The Financial Secretary to the Treasury

I thank Opposition Members for their comments. There is very clear alignment on this point. Clause 12 means that postmasters affected by the Horizon IT scandal receive the compensation that they deserve, regardless of how they arrange their business affairs. I should also make it clear that there is additional support for impacted individuals; HMRC has also set up a dedicated extra support team and phone helpline to provide postmasters and sub-postmasters with additional support. I commend the clause to the Committee.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.