Watchdog clears £142M Post Office subsidy for Horizon fallout and IR35 bill

[TrueBlueTerrier]

https://www.theregister.com/2026/03/11/ ... subsidies/

CMA advisers say extra support justified as remediation costs and tax liability mount

The UK's competition regulator has given a conditional thumbs-up to a request for £141.8 million in subsidies to the Post Office – a publicly owned company – to cover its costs in compensation for the Horizon IT scandal in the coming year and a tax liability.

The Subsidy Advice Unit (SAU), part of the Competition and Markets Authority (CMA), has reported a request from the Department for Business and Trade (DBT) seeking advice on its plan to give the Post Office £37.4 million in fiscal 2026/27 to continue to take action in response to the Horizon IT scandal and another £104.4 million to settle a tax liability under IR35 (a mechanism commonly used by tech consultants).

Following the request made in February, the SAU said the DBT has "satisfied itself that the circumstances giving rise to the need for... a further subsidy were unforeseen and were not solely caused by [the Post Office]."

However, the SAU does not approve subsidies, decide whether a subsidy can be given, or directly assess whether subsidies comply with legal requirements.

"Public authorities are responsible for taking decisions about subsidies, based on their own Assessment, having the benefit of the SAU's advice," the SAU says in a guidance document [PDF].

The Post Office has received funding from the government since 2023 to enable it to cover the costs of running its Remediation Unit and Inquiry response team. The Remediation Unit is responsible for delivering redress to subpostmasters affected by the Horizon IT scandal and other operational failures.

Horizon is an EPOS and back-end finance system first implemented by ICL, a UK tech firm majority-owned by Fujitsu in the 1990s and fully acquired by it in 1998. It has undergone two subsequent upgrades. From 1999 until 2015, around 736 subpostmasters were wrongfully prosecuted and convicted over Horizon errors, devastating lives in the process. A statutory inquiry into the mass miscarriage of justice launched in 2021 and is ongoing.

Following a number of cases successfully quashing convictions, the government introduced the Post Office (Horizon System) Offences Act 2024 to overturn all convictions made using the Horizon system. There are four schemes to compensate victims of the scandal, one of the greatest miscarriages of justice in British history. The Horizon Shortfall Scheme is run by the Post Office.

The DBT proposed a subsidy to cover up to £37.4 million in the 2026/27 financial year for the Post Office to continue to compensate victims and take part in the Post Office Horizon IT Inquiry. Separately, DBT has requested a Post Office subsidy of £104.4 million to cover tax liabilities under IR35, a tax ruling for freelancers with which some government departments have struggled to comply.

IR35 was introduced to reduce the use of off-payroll workers who avoid paying regular employment taxes, but critics argue it penalizes those who are employed on a casual basis and do not enjoy employment rights, including pensions, sick pay, and holidays. The move hit many Reg readers who work as tech contractors in both the public and the private sectors.

In its report [PDF], the SAU said the IR35 tax liability "arose primarily in connection with staff recruited in relation to the Remediation Unit," which runs the Horizon Shortfall Scheme. The SAU's Assessment said it "considers that this was unforeseeable."

Subsidy guidance in the UK states that organizations shouldn't get subsidy support if they have already received it in the last five years, unless the public authority is satisfied that the circumstances that led to the need for the subsidy were unforeseeable and were not caused by the organization getting the subsidy.

"DBT states that costs relating to the Remediation Unit and Post Office Horizon IT Inquiry have increased due to the complexity of remediation, the change from a non-statutory to a statutory inquiry, and broader changes in the… Inquiry's timeline and scope. DBT notes that [Post Office] did not cause these, nor could they have been foreseen," the report said.

The Register has asked the DBT whether it planned to proceed with providing subsidies to the Post Office. ®