HMRC is levying tax charges against investment fraud victims who are facing 'devastating welfare and financial issues', say MPs

The APPG said it was particularly concerned by reports from clinical psychologists and victims who say they are at “an acute risk of suicide, hospitalisations, loss of homes, marital breakdowns and bankruptcies". The MPs said these victims are already struggling to deal with life changing financial losses due to fraud.

The details were revealed in Parliament in the first report from the Investment Fraud All Party Parliamentary Group. The inquiry was set up in June 2023 to hear from victims and expert witnesses and to consider what steps should be taken to reform the current system.

In a statement, the APPG said: “Leading lawyers and experienced investigators gave evidence to the inquiry and described the suspected frauds involved as complex, often committed by regulated advisors or professional advisors, often involving false or misleading advice and/or part of a broader suspected conspiracy to defraud. They described how this issue has had a particularly stark impact on pension savers and groups that are highly targeted by fraudsters such as sports professionals and military veterans.”

Barrister Adam Richardson of 1EC Chambers commented, “These are historic suspected crimes that took place often over 10 years ago with HMRC taking action decades later against victims whilst ignoring the actual criminality and offences that have taken place. They are chasing low-hanging

fruit, innocent victims of crime, whilst completely ignoring the criminals and scammers who are breaking the law. It’s draconian, completely unjust and allowing fraudsters to run riot with impunity.”.

The statement added: “Expert witnesses also raised concerns that HMRC are not a signatory to the Victims Code of Practice.

“The inquiry also considered evidence from clinical psychologists and counsellors treating victims who reported that victims were experiencing “secondary victimisation” directly by HMRC actions including significant emotional and physical harm. They highlighted an acute risk to life if HMRC continues with its current strategy. Numerous victims themselves also gave evidence of being driven to attempt suicide in addition to revealing how they had been hospitalised and suffered nervous breakdowns because of this issue.”

Commenting on the report, Rick Muir, Director of the Police Foundation, an independent think tank for policing in the UK said: “This report should be taken very seriously by the Government and immediate action must be taken. Investment scams can have terrible human consequences. Tackling

these threats is being insufficiently prioritised within both policing and HMRC and much more needs to be done to support victims.

"The scandal of ‘double victimisation’ needs to end: HMRC should not be pursuing fraud victims for tax liabilities incurred as a result of the fraud.”

Caroline Nokes, MP for Southampton North and Romsey and Co-Chair of the APPG on Investment Fraud, commented: “The report makes for sober reading. Our APPG Inquiry has heard reports of a myriad of ways in which investment and pension fraud victims are being comprehensively failed in the UK right now.

“There appears to be no justice at all for these victims. HMRC are contributing to poor mental and physical health outcomes for victims, with barely existent policies or safeguarding.

“The accounts of witnesses were heart-breaking and painted a picture of misery and a total disregard for victim welfare. HMRC’s focus should be on stopping these frauds at source and holding the perpetrators responsible – not persecuting victims.”

APPG Co-Chair Alex Sobel, MP for Leeds North West added: “The Government must now listen and put a stop to this practice and ensure a better system of protection and support for investment and fraud victims. What we have right now is a system causing great harm to victims and compounding their trauma creating a double victimisation as they are subjected to re-traumatisation and further losses by HM Revenue & Customs.

"That must stop. A clear, transparent policy and new codes of practice are urgently required at HMRC to ensure victims are treated appropriately. The APPG will not rest until tangible improvements are delivered”

Sir Stephen Timms, former Treasury Minister and the current Chair of the Work and Pensions Select Committee sat on the Inquiry panel and stated: “Treasury and HMRC have important and difficult jobs to do. It’s vital for all of us that they raise the revenues due, but there must be appropriate checks and safeguards, as HMRC recognises in its Charter Responsibilities. The system does not appear at present to be operating fairly towards victims of crime. Careful steps to safeguard victims have been taken in other countries, but not in the UK. With clear evidence of direct harm being caused to victims, there is a compelling case for a thorough, independent review. This inquiry supports the conclusion of the Work and Pensions Committee in its March 2021 report that HMRC must do more to support scam victims left owing large tax bills.”

An HMRC spokesperson said: “We do not tax scam victims on income they’ve lost if the scheme they entered is allowed within tax legislation. If a customer entered an avoidance scheme, and are subsequently defrauded out of the tax avoided, they will remain liable to pay the original tax that is due under the law.

“Customers should be very careful when considering entering any scheme as they are legally accountable for their tax affairs. If something sounds too good to be true it almost certainly is.”

The spokesman stressed that HMRC has a legal duty to collect tax due, including recovering money that has been claimed incorrectly.

“Where HMRC is required to recover tax due from the taxpayer, it takes a supportive approach to dealing with taxpayers, including offering Time to Pay arrangements where appropriate. HMRC regularly publish the details of tax avoidance schemes, promoters, enablers and suppliers on GOV.uk.”

In connection with Pension Liberation schemes, HMRC said: “We recognise that individuals may have lost money by entering these types of arrangements. We do not tax pension savings lost to fraud. However, we will tax amounts that individuals release, or attempt to release, from their pensions where this is not authorised in law.”