The HSS Appeals (Tax Exemptions and Relief) Regulations 2025
Published 4 April 2025
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This publication is available at https://www.gov.uk/government/publications/the-horizon-shortfall-scheme-appeals-tax-exemptions-and-relief-regulations-2025/the-hss-appeals-tax-exemptions-and-relief-regulations-2025
Who is likely to be affected
Postmasters entitled to or in receipt of compensation payments made under the Horizon Shortfall Scheme (HSS) Appeals process.
General description of the measure
This measure exempts payments made under the HSS Appeals process from Income Tax, National Insurance contributions, Capital Gains Tax and Corporation Tax. It also relieves payments from Inheritance Tax.
Policy objective
The policy objective of this measure is to ensure compensation payments made to postmasters under the HSS Appeals process are exempt from:
- Income Tax
- National Insurance contributions
- Capital Gains Tax
- Corporation Tax
This Statutory Instrument also relieves payments in the HSS Appeals process from Inheritance Tax.
Background to the measure
This measure was announced in a written ministerial statement on 13 March 2025, confirming the tax treatment of payments made under the HSS Appeals process such as they would be exempt from:
- Income Tax
- National Insurance contributions
- Capital Gains Tax
- Corporation Tax
This Statutory Instrument also relieves payments in the HSS Appeals process from Inheritance Tax.
The Department for Business and Trade established an independent appeals process (‘HSS Appeals’) to ensure eligible postmasters affected by the Horizon scandal, where accounting software errors resulted in the Post Office incorrectly taking punitive action against postmasters, are able to make an appeal and are put back to the tax position they would have been in had the issue not occurred. This is in addition to the current dispute resolution process that is managed by Post Office Limited.
Postmasters who wish to make a claim will be given the option of pursuing their claim via the existing process, managed by Post Office Limited, or the new Department for Business and Trade process. Those who are already pursuing a claim with Post Office Limited will be given the option to continue pursuing this through Post Office Limited, or switch to HSS Appeals, administered by the Department for Business and Trade.
Detailed proposal
Operative date
The measure will have effect on 28 April 2025.
Current law
Payments made under the HSS Appeals process could be subject to Income Tax, National Insurance contributions, Capital Gains Tax, Corporation Tax and Inheritance Tax.
Schedule 15 of the Finance Act 2020 provides a power for HM Treasury to introduce secondary legislation through regulations to relieve qualifying compensation payments from tax.
Proposed revisions
There are no proposed changes to primary legislation and this measure exempts compensation payments from Income Tax, Capital Gains Tax, Corporation Tax and provides relief from Inheritance Tax, enabled by paragraph 2(5) of Part 1 and paragraph 7(1)(e) of Part 2 of Schedule 15 to the Finance Act 2020.
Part 10 of Schedule 3 to the Social Security (Contributions) Regulations 2001 is amended by the insertion of a new paragraph after paragraph 31 to disregard the payments from Class 1 National Insurance contributions.
Summary of impacts
Exchequer impact (£ million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| Empty | Empty | Empty | Empty | Empty | Empty |
The exchequer impact for this measure is set out as part of ‘Compensation Payments: Making payments to victims of the Horizon IT scandal’ in Table 5.1 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
Individuals will not need to do anything differently as the exemption will be automatically applied to payments, made by the Department for Business and Trade, under the HSS Appeals scheme. The measures are expected overall to have no impact on individuals’ experience of dealing with HMRC. No impact is expected on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be negative impacts on those in groups sharing protected characteristics.
Impact on business including civil society organisations
There is no impact on business as these measures only affect individuals.
Operational impact (£ million) (HMRC or other)
There are no operational impacts on HMRC. The Department for Business and Trade are expected to manage the administration of the schemes.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact Amir Miah or the Employment Income Policy team by email, at: employmentincomepolicy@hmrc.gov.uk.
Declaration
James Murray MP, Exchequer Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.