Legislation was enacted to provide tax exemptions and relief for compensation payments made under the Post Office Capture Redress Scheme, effective from late October 2025.
The Post Office Capture Redress Scheme (Tax Exemptions and Relief) Regulations 2025 implement tax relief measures for compensation payments made under the scheme designed to redress individuals adversely affected by the Post Office's 'Capture system.' These regulations, made by the Treasury under powers from the Finance Act 2020, specifically ensure that compensation payouts are exempt from Income Tax, Capital Gains Tax, and Corporation Tax, and provide relief from Inheritance Tax, applying these exemptions retrospectively to payments received or disposals made from October 27, 2025.
Arguments For
Provides essential financial relief to victims of the Post Office Horizon scandal by ensuring mandated compensation payments are not offset by tax liabilities (Income Tax, Capital Gains Tax, Corporation Tax, Inheritance Tax).
Establishes clear legal definitions for key terms related to the redress scheme, the 'Capture system,' and eligible recipients ('nominated individuals').
Backdates the tax relief to October 27, 2025, ensuring that victims who have already received or might receive payments are covered by these exemptions.
Arguments Against
The retrospective application of tax relief (backdated to October 27, 2025) potentially complicates past tax filings for individuals and requires administrative adjustments by HMRC.
Creates specific tax exemptions tied to an individual government scheme, potentially setting precedents that could be cited for other redress schemes, increasing complexity in the tax code.
The structure relies heavily on powers granted under Schedule 15 of the Finance Act 2020, which itself relates to significant governmental oversight and technological failures.
The Treasury make these Regulations in exercise of the powers conferred by paragraphs 2(5), 3(5), 4(3)(c) and 5(7) of Part 1 and 7(1)(e), 7(3), 9(3)(b) and (d) and (4) and 10(3)(b), (4)(b) and (5) of Part 2 of Schedule 15 to the Finance Act 2020.
The Treasury legally established these Regulations using specific powers granted under Schedule 15 of the Finance Act 2020.
This primary Act provided the legislative basis for implementing tax treatments related to the redress scheme structure outlined in the subsequent Parts of the Schedule.
- Citation and commencement
These Regulations may be cited as the Post Office Capture Redress Scheme (Tax Exemptions and Relief) Regulations 2025 and come into force on 20th November 2025.
The official short title identifies this statutory instrument as the Post Office Capture Redress Scheme (Tax Exemptions and Relief) Regulations 2025.
These rules officially began their legal effect on November 20, 2025.
- Interpretation
(1) In these Regulations—
“the Capture system” means any version of the computer system used by Post Office Limited known as Capture or the Capture Accounting System;
“nominated individual” means any person who was a shareholder or a director of a company or a partner in a partnership which ceased to exist and that would have been eligible for compensation under the Post Office Capture Redress Scheme;
“Post Office Capture Redress Scheme” means the scheme announced by His Majesty’s Government on 19th June 2025 to compensate people adversely affected by the Capture system.
(2) For the purposes of provision in these Regulations made under Part 1 of Schedule 15 to the Finance Act 2020, “Post Office Limited” has the same meaning as it does in Part 2 of that Schedule.
This section defines core terms used throughout the Regulations.
The 'Capture system' refers to the specific Post Office IT system that caused the issues.
A 'nominated individual' is a person whose past company or partnership would have qualified for compensation if they were still active.
The 'Post Office Capture Redress Scheme' is the finalized government program to compensate those harmed by the IT system, first announced in June 2025.
Additionally, 'Post Office Limited' takes its standard definition as established in the relevant part of the Finance Act 2020 legislation.
- Exemption from income tax for payments made under the Post Office Capture Redress Scheme
(1) A payment of compensation made by the Department for Business and Trade to a person under the Post Office Capture Redress Scheme or to a nominated individual is a qualifying payment for the purposes of paragraph 3 of Part 1 of Schedule 15 to the Finance Act 2020.
(2) This regulation has effect in relation to payments received on or after 27th October 2025.
Compensation payments delivered by the Department for Business and Trade under the redress scheme, whether to the primary victim or a nominated individual, qualify for Income Tax exemption as defined in the Finance Act 2020.
This exemption applies to all relevant payments issued on or after October 27, 2025.
- Exemption from capital gains tax for payments made under the Post Office Capture Redress Scheme
(1) A payment of compensation made by the Department for Business and Trade to a person under the Post Office Capture Redress Scheme or to a nominated individual is a qualifying payment for the purposes of paragraph 4 of Part 1 of Schedule 15 to the Finance Act 2020.
(2) This regulation has effect in relation to disposals made on or after 27th October 2025.
Compensation payments made by the Department for Business and Trade under the scheme are recognized as qualifying payments for the rules concerning Capital Gains Tax (CGT) under the Finance Act 2020.
This recognition applies when asset disposals linked to the compensation occurred on or after October 27, 2025.
- Relief from inheritance tax for payments made under the Post Office Capture Redress Scheme
(1) A payment of compensation made by the Department for Business and Trade to a person under the Post Office Capture Redress Scheme or to a nominated individual is a qualifying payment for the purposes of paragraph 5 of Part 1 of Schedule 15 to the Finance Act 2020.
(2) This regulation has effect in relation to deaths occurring on or after 27th October 2025.
Compensation payments distributed by the Department for Business and Trade qualify under the measure designed to provide Inheritance Tax relief under the Finance Act 2020.
This tax relief applies to the estates of people whose deaths occurred on or after October 27, 2025.
- Exemption from corporation tax for payments made under the Post Office Capture Redress Scheme
(1) A payment of compensation made by the Department for Business and Trade to a person under the Post Office Capture Redress Scheme or to a nominated individual is a relevant compensation payment for the purposes of Part 2 of Schedule 15 to the Finance Act 2020.
(2) This regulation has effect in relation to payments received on or after 27th October 2025.
Payments made by the Department for Business and Trade for the redress scheme count as 'relevant compensation payment' for Corporation Tax purposes under Part 2 of the enabling Act.
This exemption from Corporation Tax applies to payments received starting from October 27, 2025.
- Exemption from income tax and capital gains tax for relevant onward payments for payments made under the Post Office Capture Redress Scheme
(1) Paragraph 10(3)(b) of Part 2 of Schedule 15 to the Finance Act 2020 has effect in relation to payments received on or after 27th October 2025 for payments made under the Post Office Capture Redress Scheme.
(2) Paragraph 10(4)(b) of Part 2 of Schedule 15 to the Finance Act 2020 has effect in relation to disposals made on or after 27th October 2025 for payments made under the Post Office Capture Redress Scheme.
These provisions address onward payments (where the initial recipient passes the compensation money to others, like heirs or relevant parties).
The relevant section of the Finance Act 2020 concerning Income Tax treatment of these onward payments applies from October 27, 2025.
Similarly, the section dealing with Capital Gains Tax treatment for onward disposals takes effect for disposals made on or after the same date.
Two of the Lords Commissioners of His Majesty's Treasury 28th October 2025
This section records the signatures of the two appointed Lords Commissioners of His Majesty's Treasury, Christian Wakeford and Stephen Morgan, who authorized these regulations on October 28, 2025.
Explanatory Note (This note is not part of the Regulations)
These Regulations provide for exemptions from capital gains tax, corporation tax and income tax and a relief from inheritance tax for payments received under the Post Office Capture Redress Scheme and for payments made to nominated individuals.
Relevant onward payments made by companies will be exempt from income tax and capital gains tax.
The Department for Business and Trade makes payments under the Post Office Capture Redress Scheme and to nominated individuals to compensate those who have been adversely affected by the Capture system.
These exemptions and the relief apply with retrospective effect in accordance with regulations 3(2), 4(2), 5(2), 6(2), 7(1) and 7(2) under the powers in paragraphs 3(5), 4(3)(c), 5(7), 9(4) and 10(5) of Schedule 15 to the Finance Act 2020.
A Tax Information and Impact Note covering this instrument will be published on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.
The accompanying note clarifies this is not an official part of the law but explains its purpose: to grant exemptions from CGT, Corporation Tax, and Income Tax, alongside Inheritance Tax relief for all redress payments and payments to nominated individuals.
It confirms that certain onward payments by companies also receive Income Tax and CGT exemption.
The note explicitly states that the Department for Business and Trade handles the payment administration to compensate victims of the Capture system.
Importantly, it confirms that the tax reliefs apply retrospectively based on specific sub-regulations referencing the Finance Act 2020 powers.
A separate Tax Information and Impact Note (TIIN) detailing administrative effects will be made available online.
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