The Post Office Horizon Compensation and Infected Blood Interim Compensation Payment Schemes (Tax Exemptions and Relief) Regulations 2023

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations provide for exemptions from income tax and capital gains tax in relation to Overturned Historical Conviction compensation payments, Group Litigation Order compensation payments and Infected Blood Scheme compensation payments and a relief from inheritance tax in relation to Overturned Historical Conviction compensation payments and Infected Blood Scheme compensation payments.

Overturned Historical Conviction compensation payments are made by Post Office Limited to people who have had a conviction quashed because it involved evidence from the Horizon system. Group Litigation Order compensation payments are made by the Department for Business, Energy and Industrial Strategy or the Department of Business and Trade to the people who were a party to a claim against Post Office Limited in respect of the Horizon system that was subject to a group litigation order. The Infected Blood Scheme provides an interim compensation payment to people in receipt of support from one of the four UK infected blood support schemes.

Schedule 15 to the Finance Act 2020 provides for exemptions and relief from tax in respect of qualifying payments. Under paragraph 2(5) of that Schedule, the Treasury may by regulations specify compensation payments made by a public authority or by or on behalf of the United Kingdom government to be qualifying payments. Paragraph 3 of the Schedule provides for an exemption from income tax in respect of receipt of a qualifying payment. Paragraph 4 of the Schedule provides for an exemption from capital gains tax, where a disposal arises as a result of a person forfeiting, surrendering or refraining from exercising rights in return for a qualifying payment and on a disposal of the right to receive a qualifying payment (or an interest in such a right). Paragraph 5 of the Schedule provides for a relief from inheritance tax where a qualifying payment is received by a person or the personal representatives of a person and reduces the tax chargeable on the value transferred by the transfer made on the person’s death to zero.

These exemptions and reliefs apply with retrospective effect in accordance with Regulation 1(2) under the powers in paragraphs 3(5), 4(3)(c) and 5(7) of Schedule 15 to the Finance Act 2020. These Regulations have effect in relation to Overturned Historical Conviction compensation payments from 22nd July 2021, Group Litigation Order compensation payments from 1st August 2022 and Infected Blood Scheme compensation payments from 28th October 2022.

Regulation 3 specifies that Overturned Historical Conviction compensation payments, Group Litigation Order compensation payments and Infected Blood Scheme compensation payments are qualifying payments for the purposes of paragraph 3 of Schedule 15. This means that there is no liability to income tax arising from the receipt of any of these payments.

Regulation 4 specifies that Overturned Historical Conviction compensation payments, Group Litigation Order compensation payments and Infected Blood Scheme compensation payments are qualifying payments for the purposes of paragraph 4 of Schedule 15. This means that the transfer by recipients of their rights in return for a compensation payment, or their disposal of the right to receive such a payment, does not give rise to gains chargeable to capital gains tax.

Regulation 5 specifies that Overturned Historical Conviction compensation payments and Infected Blood Scheme compensation payments are qualifying payments for the purposes of paragraph 5 of Schedule 15. This means that these compensation payments are relieved from inheritance tax.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen.