Last week, following the airing of Mr Bates vs the Post Office, another 50 sub-postmasters came forward adding to the 700 or so previously known victims of the Post Office miscarriage of justice. The Post Office wrongly claimed sub-postmasters had taken money when in fact the computerised accounting system was faulty. The sub-postmasters, some of whom were prosecuted were told that they were the only one asserting the accounting system was faulty when this was completely untrue and the Post Office knew they were covering up issues with their Fujitsu Horizon IT systems.
What might not be known and seems widely unreported on is that the Post Office shared their flawed information with HMRC (Her Majesty’s Revenue and Customs) and have been doing so for several years. This data sharing allowed HMRC to impose significant tax penalties and tax assessments on innocent sub-postmasters. Even where the sub-postmasters asserted the data was flawed and in spite of the scandal, HMRC maintained pressure and did not withdraw their tax assessments and penalties for several years.
HMRC mis-use of Post Office Horizon Data and Wrongful Maintenance of Tax Penalties and Assessments
In spite of the fact that the scandal came to light a decade ago and prosecutions were abandoned in 2015, and in spite of the High Court made a group litigation order on 22 March 2017 on behalf of hundreds of sub-postmasters, HMRC maintained assessments and penalties against innocent sub-postmasters leaving them to fight it out in the First Tier Tax Tribunal for several years.
HMRC employs a team of solicitors and barristers and has access to external tax counsel, in essence HMRC has unlimited legal resources and is a very experienced and sophisticated litigant compared to the humble postmaster who is not legally or financially sophisticated and will not have an army of lawyers at his or her disposal.
Ordinarily, if a taxpayers wins at the Tribunal, they are not allowed to recover their costs which often exceed the tax and penalties that are being challenged.
HMRC vs Harston Post Office (Tax Appeal)
Fortunately for our client, the Harston Post Office, the injustice came to the attention of M Ali Akram, the senior partner of Lexlaw Solicitors of Middle Temple, City of London. M Ali Akram, a dual-qualified solicitor-advocate and barrister said:
“I practise in the area of HMRC tax litigation and work with ex-HMRC colleagues. We learned that the sub-postmaster at Harston Post office had been accused pocketing over £56,000 from the Post Office sales based upon information from The Post Office. Their accountant had appealed the penalties and tax assessments to the Tax Tribunal, but HMRC would not give way. So, I agreed to take over the appeal and we instructed ex-HMRC counsel Andrew Young an experienced tax Barrister.”
“We asked HMRC to reconsider their stance given what had come to light about the Post Office scandal. But HMRC simply refused. We were concerned that our client would have to pay a very large sum for expert evidence to prove what we already knew about Post Office accounts and that our client would probably never get that cost back. Therefore, we strategically applied to the Tribunal to reclassify the appeal to the complex category meaning that the loser would pay the winners costs.”
“Not surprisingly HMRC strongly opposed this and came to the hearing with their legal army including counsel and fought our application tooth and nail. Fortunately, following the hearing of arguments on both sides, Judge Chapman KC agreed and classified the case as one in which the loser would pay costs to the winner.”
“Now HMRC faced paying our client’s costs. Faced with this pressure HMRC finally agreed that the penalties and tax assessments would be completely withdrawn.”M Ali Akram, Lexlaw Senior Partner
The tax appeal battle with HMRC continues however as our client Sub-postmaster faces financial ruin if he cannot fully recover the costs of his now six year battle with HMRC. The level of recoverable costs will soon be determined on 15 January 2024 at a hearing of the First-tier Tax Tribunal. Remarkably, given the circumstances, HMRC are threatening to seek some costs from the Sub-postmaster victim.
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HMRC Lose Postmaster Appeal but refuse to pay Indemnity Costs & Threaten Victim
There is still an ongoing argument over costs. HMRC have accepted that they should meet the Sub-postmaster’s costs but want to pay on a standard basis not the indemnity basis meaning that not all of the costs will be paid. LexLaw say that costs should be paid on an indemnity basis which means more of the costs will be recoverable. Indemnity costs are given where something in litigation is out of the ordinary. Our senior partner, M Ali Akram said:
“I find it a source of utmost dismay that HMRC don’t see accusing hardworking sub-postmasters of dishonestly taking money based on known and established flawed evidence as being out of the ordinary. That HMRC maintained their flawed assessments for six years is a matter of severe concern and MPs and the HM Treasury should be asking critical questions of the Commissioners for HM Revenue and Customs especially since this case is not an isolated example. HMRC engaged in poor litigation conduct in this case by not withdrawing their penalties and assessments at a much earlier stage than six years. They caused considerable distress to our client Sub-postmaster who is a victim of a miscarriage of justice by the Post Office which miscarriage of justice HMRC cruelly exacerbated over an unacceptably long period of time by pursuing flawed assessments based on Post Office data. HMRC’s behaviour is a clear extension of the Post Office scandal which needs to be exposed.”M Ali Akram, Lexlaw Senior Partner
First-tier Tax Tribunal Hearing: Harston Post Office vs HMRC (15 January 2024)
The Tribunal will hear the sub-postmaster’s application for indemnity costs on 15 January 2024. HMRC are in effect sore losers and say that if the application fails, they will want their costs for the temerity of the Sub-Postmaster victim for asking for indemnity costs.
We and our ex-HMRC counsel, will be raising our concerns to the First-tier Tax Tribunal over the poor litigation conduct of HMRC. Their tax allegations, wielded with the authority of the state and supported by substantial resources, were of serious effect and consequence on our Sub-postmaster client. HMRC’s handling of the matter was poor in the extreme and they took a blinkered approach to utilising Post Office date in spite of the known scandal. In spite of the miscarriage of justice becoming publicly known via developments in the civil courts and amid a decade-long growing scandal, HMRC persisted in its tax demands and it took six years before HMRC deigned to withdraw their improper tax demands. In fact, only after the appeal (via our contested application), was re-categorised by the tax tribunal as complex, with associated risks of meeting the Appellant’s costs, did HMRC reassess its position and withdraw its improper tax demands. It seems HMRC acted on financial as opposed to moral reasons.
HMRC used Post Office data to claim dishonesty and raise tax demands against an innocent sub-postmaster, who is in fact an hardworking and honest man. HMRC must bear responsibility for turning a blind eye to the poor quality of data they obtained from the Post Office and for maintaining their improper and unreasonable tax demands for 6 years in the face of an increasing scandal.M Ali Akram, Senior Partner, LEXLAW
Media Interest: HMRC & Post Office Scandal
The judgment from the contested hearing on 26 May 2022 is available online under appeal number TC/2018/00981 and can be found on the British and Irish Legal Information website.
The full title of the appeal is:
IN THE FIRST TIER TRIBUNAL TAX CHAMBER
Appeal No: TC.2018.00981 & TC.2018.00982 HARSTON CONVENIENT STORE LIMITED
 HARSTON POST OFFICE AND VILLAGE STORES
THE COMMISSIONERS OF HIS MAJESTY’S REVENUE AND CUSTOMS
Any request, media or otherwise, to watch the cost hearing listed on 15 January should be directed to the First Tier Tax Tribunal. Email [email protected] or telephone: 0300 123 1024.
Any media request for further comment from us can be made via email to [email protected] – we will reply immediately. You can also call us on 02071830529.
Other Postmasters facing HMRC Tax Demands based on Horizon Data
We urge any sub-postmasters who have been issued with penalties and tax assessments to take legal advice. There are normally strict time limits for challenging tax demands but there are possible ways of having time limits extended in appropriate circumstances.
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