HM Treasury has signed off tax exemptions for compensation paid under the Post Office Capture Redress Scheme, confirming no Income Tax or Capital Gains Tax on individual awards, a Corporation Tax exemption for company receipts, and a specific relief for Inheritance Tax. The statutory instrument was made on 28 October, laid on 29 October, comes into force on 20 November, and applies retrospectively from 27 October 2025. The mechanism relies on Schedule 15 of the Finance Act 2020, which allows Treasury regulations to designate schemes and switch on tax reliefs and exemptions.

The Department for Business and Trade (DBT) formally opened the Capture Redress Scheme on 29 October 2025 for postmasters who suffered shortfalls attributable to the 1990s “Capture” accounting system. The launch follows an independent Kroll review concluding there was a reasonable likelihood Capture caused losses, with DBT initially processing 150 applications and making preliminary payments ahead of full panel assessments.

DBT’s guidance sets out how to apply and who can claim. The scheme is open to affected postmasters without relevant criminal convictions, while any Capture‑related convictions should go through the Criminal Cases Review Commission route before redress. Applications and supporting evidence are submitted directly to DBT.

For applicants missing paperwork from the 1992–2000 period, HMRC has published a simple process to request historical tax records to evidence postmaster status and business activity. This can be done by the claimant or their legal representative using a standard form and electronic signatures are accepted.

The regulations also recognise people connected to shuttered businesses. In addition to direct claimants, payments to certain individuals linked to dissolved companies and partnerships are brought within scope so that those whose corporate vehicle no longer exists can still receive compensation without a tax charge.

On tax mechanics for individuals, the instrument treats awards as “qualifying payments” under Part 1 of Schedule 15. That means no liability to Income Tax, the sums are ignored for other income tax purposes, and related gains are disregarded for Capital Gains Tax. The same Part provides a specific relief for Inheritance Tax where relevant.

For companies, payments under the scheme are “relevant compensation payments” under Part 2 of Schedule 15 and are exempt from Corporation Tax. If a company passes compensation on-for example to former owners or family-the onward payments are also exempt from Income Tax and Capital Gains Tax, preventing a second layer of taxation. The new regulations explicitly designate the Capture scheme for these purposes.

Timing matters. The exemptions apply to payments received on or after 27 October 2025; the Capital Gains Tax disregard applies to disposals made on or after that date; and the Inheritance Tax relief applies to deaths occurring on or after 27 October 2025. Although the instrument starts on 20 November, the look‑back ensures early awards are covered.

A practical example for owner‑managers: a former director of a limited company that used Capture in the 1990s receives compensation in their own name because the company was dissolved years ago. Under these rules, the payment is not taxable and should not inflate Self Assessment income, but keeping contemporaneous evidence and the DBT award letter on file remains good practice.

For an active company that receives a lump‑sum award and then pays amounts on to a former sub‑postmaster, the receipt is outside Corporation Tax and the onward payments are outside Income Tax and CGT for the recipient. Firms should still document the board’s decision, label entries clearly in the ledger, and align disclosure with UK GAAP or IFRS treatment while noting the statutory tax exemptions.

On award sizing and process design, media reporting indicates banded awards up to £300,000, with room for higher payments in exceptional cases, and a single appeal stage-useful context for cash‑flow planning even though tax is now settled. We will update if DBT alters these parameters.

The Treasury flagged earlier this week that National Insurance would not be payable on redress either, aligning the tax position across the board; a formal Tax Information and Impact Note is due to be published on GOV.UK. For accountants and advisers, the immediate checklist is simple: confirm eligibility, line up evidence from HMRC where needed, and prepare to ring‑fence receipts without posting them through the P&L tax line.