Post Office Horizon IT Scandal: HMRC’s Unjust Tax Demands Against UK Postmasters

In the aftermath of Mr. Bates vs the Post Office, an additional 50 sub-postmasters have stepped forward, joining the 700 victims previously known in the Post Office Horizon IT scandal. This miscarriage of justice falsely accused sub-postmasters of financial wrongdoing due to faults in the computerised accounting system. Unbeknownst to many, the Post Office shared this flawed information with HMRC (Her Majesty’s Revenue and Customs), allowing HMRC to impose tax penalties and assessments on innocent sub-postmasters.

Despite the scandal surfacing a decade ago and prosecutions being dropped in 2015, HMRC persisted in maintaining tax penalties and assessments against innocent sub-postmasters. This forced these victims to engage in a prolonged legal battle in the First Tier Tax Tribunal. HMRC, armed with a team of legal experts and unlimited resources, held their ground against sub-postmasters, who lacked similar legal and financial sophistication.

The Harston Post Office found support in M Ali Akram, the senior partner of Lexlaw Solicitors. In a case involving accusations of pocketing over £56,000 based on faulty Post Office data, Akram and his team took over the appeal, engaging and experienced ex-HMRC tax Barrister. After a contested application, the Tribunal reclassified the case as complex, putting pressure on HMRC, which eventually led to the withdrawal of improper tax demands.

Despite HMRC’s acknowledgment of paying the Sub-postmaster’s costs, there was a dispute over the payment basis. HMRC was reluctant to pay indemnity costs, insisting on a standard basis, which would cover only a portion of the costs. LexLaw argued that the costs should be on an indemnity basis, given the extraordinary nature of the litigation and misconduct by HMRC in maintaining tax demands against an innocent sub-postmaster using dodgy data. The hearing to determine the recoverable costs was set for January 15, 2024.

First-tier Tax Tribunal Hearing: Harston Post Office vs HMRC (15 January 2024)

The Tribunal was listed to decide on the sub-postmaster’s application for indemnity costs on January 15, 2024. Despite HMRC’s acceptance of paying the Sub-postmaster’s costs, the argument over the costs amount to be paid underscored the reluctance of HMRC to acknowledge the gravity of their misconduct.

Media Interest and HMRC Post Office Scandal

LexLaw invites media interest in the ongoing case, highlighting HMRC’s poor litigation conduct and the substantial impact on innocent sub-postmasters. The contested hearing judgment from May 26, 2022, can be found on the British and Irish Legal Information website under appeal number TC/2018/00981.

Update on HMRC Costs Settlement (15 January 2024):

Following increased media scrutiny, HMRC did a complete U-turn, agreeing to pay indemnity costs at a record level of 97% of costs claimed. Our Senior Partner M Ali Akram expresses concern over HMRC’s attempt to avoid exposure for relying on flawed Post Office data, potentially affecting numerous postmasters who may have faced flawed tax demands and HMRC debt recovery actions including HMRC bankruptcy petitions.

The British Post Office Horizon IT scandal continues to unfold, catching out HMRC’s unjust collusional use of Horizon Data in the wrongful pursuit of tax penalties against innocent sub-postmasters. This legal battle serves as a stark reminder of the need for accountability and transparency in the face of government agencies’ misuse of data. Our client, the Harston Post Office, has now won a long battle in the First Tier Tax Tribunal. Despite a contested application and case reclassification, HMRC maintained improper tax demands for six years. The dispute over indemnity costs further highlights HMRC’s reluctance to fully acknowledge the severity of their misconduct. There is a clear broader need for accountability in the face of governmental misuse of data and its impact on innocent hardworking individuals.

M Ali Akram, Senior Partner, LEXLAW