What the post office is really about
In an astonishing piece of forensic accounting, Dan Neidle of Tax Policy Associates and Heather Self, uncover that the Post Office has potentially over-claimed £100m of tax-relief for the cost of its discredited prosecutions of sub-postmasters.
The Post Office unlawfully claimed £934m tax relief for its compensation payments, and now faces an unexpected £100m tax bill.
Neidle doesn’t mince his words
The Post Office has claimed a £934m tax deduction for its compensation payments to the victims of the Post Office scandal. That’s outrageous – and also unlawful. The consequence is that the Post Office has underpaid its corporation tax by over £100m over the last five years, and may no longer be solvent.
We understand that HMRC are actively pursuing this point – and it’s just one of five major Horizon scandal matters where the Post Office has, we believe, materially underpaid its tax. The Post Office failed to declare these issues in its accounts until this year, when it included an obscure reference which failed to adequately disclose the point.
This could make the Post Office technically insolvent. The word “technically” is important as the debtor is HMRC and the creditor are both 100% tax-payer owned.
The FT have picked up the story and have done a phone round. The general feeling is that the Government would normally plug any black hole, but these are not normal times for the Post Office.
One black hole that won’t have to be plugged , is any pension black-hole. The Post Office has seen to that
The pension drawbridge is up
The circularity of the situation extends to the pension liabilities to the Post Office (which are primarily to pay £13m into its DC plan as the DB plan largely owns annuities purchased from Rothesay Life. DB members should in theory be immunised from any impact of the Post Office’s capacity to meet its obligations, despite liabilities of the plan.
In retrospect, it looks like the timing of the buy-out was unfortunate, the valuation of the two buy-out policies has plummeted since the start of 2022 as would be expected.
The buy-out deal included a clause that meant the Post Office couldn’t participate in the surplus on RMPP (what would have been a handy £57m). Add that to the opportunity cost of buying out in 2017 and you have to ask where the shareholder is on all this.
The Post Office has also recently taken the opportunity to buy out its share of the Royal Mail Senior Executive Pension Plans, ring-fencing its senior people from problems to come. That’s cosy.
So where does this leave the Post Office and its pensions?
Add to the above, the Government’s £50bn unfunded pension scheme which takes care of pension liabilities prior to 2012 for Royal Mail and the Post Office and you get the complete picture.
It’s a picture that shows how over the past 10 years, the entirety of the Post Office’s defined benefit pension liabilities have been secured either by the Cabinet Office or by insurers.
Meanwhile, the Post Office tells its shareholders – the tax-payer, that is is trying to make a profit. It actually made a loss for 2022/3 of £76m (down from a £130m loss the previous year).
The tax-payer may well ask, “what have the Post Office Executive got to lose?”
Its pensions are now fully protected against whatever slings and arrows the public can throw at them. Whatever equity the tax-payer thinks it has in the Post Office , looks to be shrinking in value very fast.
The Statutory Royal Mail Pension Scheme was originally funded and as far as I know still is. This represents accrued benefits until the point the Royal Mail was floated after being demerged from Post Office. Subsequently Post Office had a relatively short lived DB scheme which was subject to a buy-in after closure to future accrual. A GPP was introduced for future pension provision. The trust deed of the closed funded DB scheme does not permit a refund to Post Office.