Source · Select Committees · Work and Pensions Committee
Recommendation 33
33
HMRC has been described as “unrelenting and uncompromising” in the pursuit of unauthorised payment charges.
Recommendation
HMRC has been described as “unrelenting and uncompromising” in the pursuit of unauthorised payment charges. While the position taken by HMRC is legally correct, it has often lacked empathy or understanding of impact that its demands have on victims. We recommend that HMRC should make greater use of its current discretion to support pension scam victims left owing large tax bills and that it should do its upmost to provide them certainty where possible. HM Treasury should recognise that, in some clearly defined circumstances, where the saver has been the victim of a crime and made no financial gain from the early access, it may not be in the public interest to demand payment of tax due. Where someone seeks to access their pension before the age of 55 without being eligible for one of the exemptions, we recommend that the pension schemes be required to withhold the Income Tax and surcharge and pay this to HMRC. In the event that the tax is not due, the individual could reclaim it from HMRC. This would ensure that victims of scams would not be subject to a tax bill on top of their pension loss. If a person has made a financial gain from early access, but can demonstrate that they have been the victim of a crime, they should be given the option to return the gains to an approved scheme within three years of the point at which they ought to have realised they have been scammed. If HMRC is unable to make greater use of its current discretion to waive the tax due by pension scam victims then the Government should consider whether legislation is required to give HMRC the option not to pursue the tax penalties of pension scam victims. (Paragraph 132) Protecting pension savers—five years on from the pension freedomss Pension scams 63
Government Response
Position Not Stated
HM Government · verbatim extract
Position Not Stated
Her Majesty’s Revenue & Customs (HMRC) aims to treat all of its customers with empathy and respect. This includes tailoring its approach to individual customer needs where additional support is required. In circumstances where tax is due, HMRC may refer customers to a free independent Debt Adviser. Where customers access their tax privileged pension savings before they are 55, HMRC has to collect the unauthorised payment charge that is due under the law. However, customers are only taxed on funds they, their family members or other connected persons receive, either directly or indirectly. Where HMRC accepts that a pension scheme member is defrauded of their tax-privileged pension savings as part of a pension scam, they are not taxed on the money they have lost as a result of the fraud. Legislation already requires pension schemes to report to HMRC all unauthorised payments, including when someone accesses their pension before the age of 55 without being eligible for one of the exemptions. HMRC recognises that withholding tax can be an effective mechanism to minimise the reporting and payment burdens on individuals. Whilst pension schemes are required to withhold tax on payments made to scheme members after the age of 55 under pension flexibility rules, it is not clear how this approach could be used to address the concerns raised for those looking to access their pension scheme before the age of 55, particularly if it impacted all transfers or was reliant on schemes involved in pension scams. Responses to the Committee’s Fifth Report of Session 2019–21 19 HMRC will explore with stakeholders whether there are proportionate solutions to the practical issues with this approach. MRC’s discretionary powers are limited. The Commissioners consider exercising these powers when they apply, and the Department has a Pensions Governance Group that advises the Commissioners on this.
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