HMRC Campaign: The Taxation of UK Investment and Pension Fraud Victims


Overview


The Investment Fraud Special Advisory Committee has launched a campaign to address the unfair and damaging tax treatment of victims of investment and pension fraud in the UK. Following the 2023 Inquiry Report from the All-Party Parliamentary Group on Investment Fraud, the Committee is determined to fight for systemic reforms to alleviate the burdens on these victims and ensure a fair tax system moving forward.


The Investment Fraud APPG Inquiry Report


The APPG Inquiry into the taxation of fraud victims, published in November 2023, revealed the shocking consequences many victims face, including bankruptcy, homelessness, and in some tragic cases, suicidal ideation. The report shed light on the systemic failures in the current tax treatment, underscoring how victims are not only suffering from financial losses but are further burdened by unfair tax penalties and mounting interest imposed by HMRC.


The Problem: Unfair Tax Treatment


  1. Unjust Tax Liabilities: Victims of fraud are being pursued for tax on investments they were deceived into, with penalties and interest piling up for years. In many cases, victims lose everything, while the actual fraudsters go unpunished.
  2. Mischaracterisation as Tax Avoiders: Fraud victims are often incorrectly labeled as tax avoiders by HMRC, blocking their access to debt relief options and subjecting them to unnecessary stigma and financial ruin.
  3. Systemic Failures: Fraud victims are left to deal with protracted disputes, while the enablers of these schemes—regulated financial advisors and institutions—escape accountability, leaving victims with little recourse for justice.


The Impact on Victims


Victims of investment and pension fraud are facing extreme consequences, both financially and emotionally. Many report severe mental health crises, broken relationships, and, tragically, suicide attempts. The emotional toll is compounded by HMRC’s aggressive pursuit of tax liabilities, interest, and penalties, creating an overwhelming and often life-threatening situation for victims.


Welfare Concerns


Victims have reported feeling unsupported in navigating the complex tax and legal systems, exacerbating the mental and physical toll of their situation. Many are left without the typical debt relief mechanisms afforded to other taxpayers, leaving them trapped in an unjust system. In particular, victims who were scammed out of their savings and pensions face tax penalties on money they never received, a scenario that many describe as a "double punishment."


A Call for Reform: Actions We Are Advocating For 


The Investment Fraud Special Advisory Committee is calling for urgent reforms to address the ongoing struggles of historic fraud victims: 


  1. Immediate Relief for Historic Victims: We are advocating for a moratorium on interest, penalties, and enforcement actions against fraud victims, allowing for a fair and meaningful resolution. This will include putting forward a settlement proposal to resolve historic cases fairly and proportionately.
  2. Direct Treasury Oversight: We urge the Treasury to oversee HMRC’s handling of fraud cases, ensuring fair treatment and alignment with HMRC’s Charter principles.
  3. Victim Support Services: We call for an independent, government-funded service to support fraud victims in navigating tax and enforcement challenges, free from HMRC influence.
  4. Long-Term Law Reform: We advocate for a formal code of practice within HMRC addressing fraud victims and legislative protections to enshrine these changes. 


What We Are Asking from HMRC and the Treasury 


  1. Deliver Fair Resolutions: Ensure victims are not punished for being misled into fraud, and their recovery is supported by HMRC’s principles of fairness. 
  2. End Victim-Blaming Practices: Stop treating fraud victims as tax avoiders and ensure they are not penalised for crimes they didn’t commit. 
  3. Expand HMRC Discretion: Broaden debt relief options for fraud victims, including penalty waivers and partial settlements.
  4. Commit to Systemic Reforms: Implement long-term changes to prevent fraud victims from being unfairly targeted and hold perpetrators accountable. 

 


What We Are Asking of Victims


Victims play a crucial role in driving the campaign forward. We urge all affected individuals to take action:


  1. Contact Your MPs: Share your experience with your Member of Parliament and ask for their support in advocating for reform.
  2. Secure Parliamentary Involvement: Encourage your MP to raise these issues with the Treasury and HMRC, and to support calls for systemic changes.
  3. Provide Evidence: Share your story with us to help build a compelling case for change. Your experiences will highlight the injustice and help inform reform.
  4. Take Action: Join our campaign to push for fair resolutions for fraud victims. It’s time for the system to support those who have already been victimised.


The Need for Long-Term Reform


This campaign is not just about addressing individual cases—it is about safeguarding the integrity of our entire financial system. Victims of fraud should not bear the financial and emotional cost of the crimes committed against them. It is critical that we reform the tax system to ensure that victims are treated fairly and that enablers of these frauds, such as regulated financial advisors and institutions, are held accountable for their actions.


The time for reform is now. We must act to protect fraud victims from further harm and rebuild trust in the UK’s financial services system. By ensuring fair tax treatment for fraud victims, we will help restore confidence and ensure that no one is penalised for being deceived by financial criminals.


Join Our Campaign


We invite all fraud victims, advocates, and supporters to join us in this critical campaign. Together, we can ensure that victims are treated fairly, that fraudsters are held accountable, and that the financial system works for everyone, not just for those who exploit it.


November 2023 Inquiry Report


For more details, you can read the full inquiry report below:

Our Advisory Panel

To be announced

Click to download

 Inquiry Panel

The 2023 Inquiry Panel:


  • Caroline Nokes MP (Conservative) - Co-Chair
  • Alex Sobel MP (Labour) - Co-Chair
  • Baron John Mann (House of Lords and Former Chair of the Treasury Select Committee)
  • Sir Stephen Timms MP (Labour, Former Treasury Minister and Chair of the Work and Pensions Select Committee


The 2023 Inquiry was instigated by the Investment Fraud APPG and comprised 2 inquiry sessions at Parliament. The first was chaired by conservative MP Caroline Nokes who heard direct evidence from victims. The second session was chaired by Alex Sobel MP and heard evidence and recommendations from practitioners and sector experts.

“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.’

Rick Muir, Director of the Police Foundation, an independent think tank for policing in the UK