HMRC Campaign
Pension and investment scams put victims in crisis, from key workers to retired footballers, as HMRC imposes punitive tax charges.
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One of the most important stories I've ever worked on. With the most inspiring victims... who somehow manage to keep going.
Thanks to the BBC Breakfast team at BBC News for sharing their story.
#pensionfraud #investmentfraud'
Dan Whitworth
Senior Reporter, BBC Radio 4's Money Box and BBC Breakfast (ex R1 Newsbeat and R4 Today)
Introduction
In recent years, pension and investment scams have left countless victims from all walks of life in severe financial distress. Often perpetrated by unscrupulous financial advisors, these scams and frauds often lure individuals with promises of secure investments, only to later strip them of their hard-earned savings and pensions. The repercussions of these scams are devastating, and the consequent HMRC tax charges are often exacerbating the crisis, pushing some victims to the brink of despair. FVU is calling for government intervention and greater support for victims.
The Crisis Unfolding
Victims of these scams include key workers who have dedicated their lives to serving the public, as well as retired footballers and individuals from various other professions. Despite their diverse backgrounds, they all share a common plight: trusting regulated financial advisors with their funds, only to face significant financial losses and hefty tax charges imposed by HMRC. In the case of pension fraud victims, the tax authority treats the scam-related withdrawals as unauthorised, resulting in substantial tax liabilities that victims are often left unable to pay.
The Human Toll
The financial strain and the impending tax demands have created a perfect storm of distress. Many victims, already grappling with the shock of losing their life savings, are now overwhelmed by the additional burden of tax penalties. This double blow has led to a mental health crisis, with some victims experiencing severe depression and even contemplating suicide. Some victims have been bankrupted and lost their homes. Many marriages have dissolved under the strain. Numerous victims have been hospitalised.
The Injustice
The injustice of the situation is stark. Victims, who were misled by trusted regulated financial advisors, are being penalised for actions they were deceived into taking. They are not only left without their pensions and investments but are also being pursued for taxes on money they never truly benefited from. Fraud victims united is highlighting how the UK’s current regulatory and legal framework is ill-equipped to address the unique challenges posed by these scams, leaving victims feeling abandoned and without recourse.
Additionally, HMRC's tendency to blame victims with phrases such as "if it’s too good to be true, it usually is" has exacerbated their suffering by implying that the victims themselves are solely to blame - rather than the perpetrators.
Our Campaigning
At Fraud Victims United (FVU), our campaigning efforts are focused on uniting victims and amplifying their collective voice. We are dedicated to highlighting the profound impact of fraud and the resulting tax charges on victims and calling for a more humane, victim-centered approach that prioritises their welfare. Through our campaigning, we aim to bring attention to the pain and suffering being caused to victims and to push for greater support to help victims recover and rebuild their lives. In addition to our grassroots efforts, we are proud to support and collaborate with other key campaigning initiatives, including the political work of the Investment Fraud and Fairer Services APPG, where Carly and Sue are actively involved, as well as the Pensions Scams Industry Group and the Transparency Task Force. By uniting victims and supporting these vital efforts, we hope to foster a future where fraud victims receive the recognition, support, and justice they deserve.
THE PURSUIT OF PERPETRATORS
The sense of injustice that victims experience when they are pursued by HMRC rather than the actual perpetrators of fraud is deeply harmful because it compounds the trauma they have already endured. Victims of fraud are already reeling from the emotional and financial devastation caused by being deceived and exploited, and being held accountable by tax authorities for something they did not commit can feel like a second betrayal. This sense of injustice undermines their trust in institutions meant to protect them, adding an extra layer of stress, shame, and hopelessness. The emotional toll of facing legal and financial repercussions for being a victim can lead to feelings of helplessness and frustration, further exacerbating mental health struggles and, in severe cases, contributing to depression or suicidal thoughts. Instead of receiving the support and understanding they desperately need to recover, these victims find themselves in an even more vulnerable position, unable to escape the ongoing consequences of their victimisation. This reinforces a sense of powerlessness, making it much harder for them to rebuild their lives and heal from their trauma.
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The Investment Fraud All Party Parliamentary Group Inquiry
The Investment Fraud All Party Parliamentary Group Inquiry
The Investment Fraud APPG held an inquiry into this issue in November 2023. The APPG heard evidence, views and experiences from a variety of expert stakeholders as well as victims themselves and set forward recommendations about what the Government and other organisations can do to help ensure victims are treated fairly and appropriately and to improve support for them.
The Inquiry was led by Caroline Nokes MP, and Alex Sobel MP, supported by senior parliamentarians and a panel of sector experts. The first oral evidence session was held at Parliament on 29th June 2023 and was co-chaired by Caroline Nokes MP hearing directly from victims, including many members of our Alliance. The second hearing took place on 5th July 2023 and focused on recommendations and best practice to ensure fair and appropriate treatment of victims and comprised a round-table discussion chaired by Alex Sobel MP with parliamentarians and key experts from the investment fraud and pensions sector. Many of our expert panel took part.
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Key findings for the written call for evidence:
- What tax charges are being levied against investment and fraud victims?.
- What impact is this having on victims and their families?.
- How do HMRC treat victims of investment and pension fraud? Are any changes in their current practice or policies required?
- Are fraudsters being pursued by HMRC and other law enforcement bodies for taxation of proceeds of crime?e
- Are there any legislative gaps or policy issues that need to be addressed?
- How is this issue dealt with in other countries?.
- How can we better meet the mental health needs of victims and support long term recovery?
A short form copy of the report is set out below.
The case of West v Revenue and Customs Commissioners [2019] UKFTT 602 (TC)
Our legal experts feel the law in this area is extremely unclear. However, the following First-Tier Tax Tribunal case is a notable decision. It highlighted the need for changes in HMRC’s approach to scam victims.
In this case, the taxpayer, Mr. West, was misled by the promoters of a pension liberation scheme. Facing financial difficulties due to ill health, he was offered a loan without being informed that it was linked to the transfer of his pension funds. Unknowingly, he became involved in an unauthorised pension payment situation.
HMRC issued an assessment charging Mr. West a 40% tax on the unauthorised payment. Despite Mr. West's lack of intention to misuse his pension, the Tribunal upheld the tax assessment due to the strict legislative framework governing unauthorised payments. However, the Tribunal expressed discomfort with this outcome. It acknowledged that Mr. West and his wife had been taken advantage of and recommended that HMRC focus its efforts on pursuing the promoters of such schemes rather than the victims. The Tribunal also suggested HMRC consider mitigating the consequences for individuals like Mr. West.
This case demonstrates the rigid application of rules, even when the taxpayer is a victim. While the Tribunal's judgment was bound by the existing law, it urged a more compassionate approach towards victims. This case outcome underscores the need for reform in the law to better protect fraud victims. The strict enforcement of unauthorised payment charges penalises individuals who have already suffered from exploitative schemes.
Our campaign advocates for a more compassionate approach that targets the true perpetrators of pension fraud while ensuring that vulnerable victims are not further harmed by unjust liabilities. We call for the implementation of safeguards that protect victims of crime, providing them with the support they need rather than placing additional burdens on them. It is crucial that any legal framework prioritises the fair treatment of innocent victims, preventing them from being driven to severe consequences, such as hospitalisations or, in extreme cases, suicide, due to the financial and emotional toll of these liabilities. Our aim is to create a system that balances regulation with compassion, offering victims the opportunity to recover and rebuild their lives without being retraumatised by the very institutions that should be helping them.
The US - A Model Example
The United States serves as a model example in this regard, taking fraud seriously as a threat to the financial integrity of its world-leading financial services industry. Fraudsters in the U.S. are treated harshly, and victims are offered substantial support. The Bernie Madoff case is a prime illustration: Madoff received a 120-year prison sentence for his Ponzi scheme, reflecting the severe consequences for such crimes. Additionally, the U.S. government introduced new tax laws to provide special relief to victims of Ponzi fraud, ensuring they were not doubly victimized by the tax system. Such measures not only restore faith in the financial system but also demonstrate a commitment to justice and support for those wronged by fraudulent schemes. Adopting similar policies would greatly enhance the fairness and effectiveness of HMRC's approach, ensuring that justice is served in a fair and equitable manner.
The Alliance are calling the crisis, brought on by pension and investment scams, a matter of urgent public concern. Whether key workers, retired footballers, or individuals from any other profession, all victims deserve justice and support, not further victimisation and financial distress through punitive tax measures. We are calling on the next government to intervene and ensure that those affected by these heinous scams receive the help they need to rebuild their lives.
A Call for Action
Fraud Victims United is committed to advocating for a fair and just system that prioritises the protection and support of fraud victims. Our campaign aligns with the Investment Fraud & Fairer Financial Services APPG’s calls for action and focuses on the following key objectives to ensure victims are not further harmed and are given the necessary resources to recover:
- A System Focused on Victim Support:
- We are calling for new frameworks and policies that prioritise the protection of future victims while ensuring a compassionate approach from HMRC for those affected by fraud.
- Victims should not face further harm or financial devastation due to punitive measures but should be provided with necessary welfare plans to safeguard them from risks such as suicide, hospitalisation, and other health-related issues.
- Prioritisation of Investigation and Prosecution:
- Fraud victims must see a shift in focus, with law enforcement dedicating resources to investigating and prosecuting the real perpetrators of fraud.
- We advocate for HMRC to investigate criminality and abuses of the system, and for a system that ensures those responsible, not victims, are held accountable.
- Introduction of Victim Advocates:
- We believe that fraud victims need dedicated support, similar to domestic violence or sexual abuse cases.
- Victim advocates should be introduced to guide individuals through the complex system and ensure they are not left navigating it alone.
- Support for Recovery and Rebuilding:
- We call for targeted programs to help victims recover financially and emotionally, enabling them to rebuild their lives and regain financial independence.
- By investing in recovery and rehabilitation, victims will become productive members of society, reducing long-term costs for the system and allowing them to contribute economically.
- Protecting Victims’ Rights:
- Our ultimate ambition is to ensure victims’ rights are fully supported and protected throughout the process.
- We seek a system that mitigates harm, provides comprehensive support, and ensures that fraud victims are treated with the dignity and care they deserve.
We urge the government, regulatory bodies, and other stakeholders to join us in making these changes. Together, we can build a system that empowers victims to heal and rebuild, while holding the true perpetrators accountable.
