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Pension scam victims became suicidal after being chased by the taxman, an influential group of MPs has said.
In a damning report, the All Parliamentary Group (APPG) on Investment Fraud accused HM Revenue & Customs (HMRC) of “re-traumatising” victims of fraud and inflicting “devastating” emotional and financial harm on individuals who had already lost much of their life savings by chasing them for tax debts.
It heard from victims of fraud who were hit with tax bills after accessing their retirement savings early via “pension liberation” schemes run by criminal gangs.
“Numerous” scam victims were driven to attempt suicide after HMRC chased them for tax liabilities arising from the pension and investment schemes, the APPG, set up in June, claimed.
One victim told the cross-party panel that HMRC had pursued him for £90,000 in back taxes after having his pension stolen.
He was forced to borrow money from family members to pay the bill, the parliamentary group heard, after members of the Field Force Unit at HMRC came to his home and asked him how much his car was worth when assessing his ability to pay.
Another victim said he had become suicidal after being accused of tax evasion by HMRC. His case has been under investigation for more than nine years.
He told the APPG’s inquiry: “When I was approached by HMRC in a very aggressive manner and accused of tax evasion, and threatened with bailiffs, it put me back into the mindset of when I first lost my pension.
“I felt like a failure, I lost everything, I felt like I had no future.”
Others said they and their families had been made ill by the stress of waiting for the demanding letters from the tax office.
Caroline Nokes, MP for Southampton North and Romsey and Co-Chair of the APPG, said: “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.”
Pensions scams cost savers more than £26m between 2020 and 2022, according to a Freedom of Information request by the Pensions Management Institute.
Of the 1,595 pension scams reported between 2020 and 2022, 1,185 were cases of “pension liberation fraud”, where a scammer tricks someone into accessing their pension early.
Victims of these scams face a tax charge of up to 55pc from HMRC if withdrawing funds before the pension age of 55.
Gangs will often tell the victims there is a legal loophole that means they do not have to pay tax.
Sports professionals and military veterans are among those targeted by fraudsters for their pension savings, the APPG heard.
HMRC has a legal duty to collect all debts owed to the taxpayer and offers support to tax debtors such as payment plans.
However, the cross-party panel of MPs and peers has called for an immediate suspension of charges against victims, an independent government review and reform at HMRC.
Rick Muir, Director of the Police Foundation, a think tank, said: “This report should be taken very seriously by the Government and immediate action must be taken.
“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.’”
A spokesman for HMRC 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.”