The letters often arrive just before Christmas, a brown envelope among the greetings cards. Some people know they’re coming, for others they are a bombshell. Many of the people who receive them have already lost their retirement savings, or had their identities exploited, but still the letters come.
They are sent by the UK’s tax authority, His Majesty’s Revenue and Customs. For more than a decade, HMRC has aggressively pursued the victims of fraud and mis-selling, holding them liable for charges on money that has been stolen from them. People have lost their homes and their jobs. There have been bankruptcies, divorces and suicides.
Some of these frauds are crimes that HMRC knew about, and could have prevented. Now, while the perpetrators of those crimes are free, their victims are hounded by their own government for amounts that they will never be able to repay.
The first thing to understand is that this could happen to anyone; among the victims I’ve spoken to in recent weeks are financial advisers and accountants.
In February 2010 one of these finance professionals, who has asked to be known as Jack, was one of around 100 people in attendance at an investing seminar in London. In one presentation a financial adviser told the crowd that they could unlock the investing power of their pensions by setting up a “bespoke pension trust”, which would issue them a loan against their pension pot. Re-investing that loan would give their retirement funds a boost.
The following month, Jack visited the firm in London. They had a big, serious office near the Bank of England; the business cards confirmed that the company was registered with regulator the Financial Services Authority. “It was all glossy, it was all official, it was all smooth,” Jack said. “And it wasn’t a rush, either. There was never any pressure to do it. It was all a case of you know, if you want to know more, come and contact me.”
Jack read the documents the firm supplied and spoke to other investors who had been at the seminar and were also keen to use the scheme, called Salmon Enterprises, to unlock some investment capital. He was given the number of a “customer” with whom he had a detailed conversation about the scheme; years later, he would try phoning the man again to ask what his role had been, but the number was disconnected.
Jack was an experienced finance professional with a solid pension pot. He transferred almost all of it, around £170,000, to Salmon. He received a loan back of around £135,000, leaving about £35,000 in the pension scheme – “which I never saw again”.
In the years that followed it became increasingly obvious that Jack had been defrauded: he had a brief pension statement but despite endless requests, no copy of the loan agreement. “Fraudsters don’t issue loan documents,” he told me ruefully.
The real blow came in 2015, on Jack’s son’s birthday. A letter arrived from HMRC: despite the assurances of the financial advisers, the loan he had taken out from the Salmon scheme had been classed as an “unauthorised withdrawal”, subject to a 55 per cent tax charge. With interest and other charges, he owed HMRC £89,000.
Before long, debt collectors from HMRC’s “field force” team were “knocking ferociously” on Jack’s door, demanding payment. Jack began to explain that he had been duped out of his pension and did not have £89,000 to hand. “How much is your car worth?” asked one of the field force officers, as Jack’s family looked on. “We could just take that, for a start.” When Jack asked if he could speak to HMRC about the bill they told him: “There’s no time for conversations. We need payment.”
Other victims of Salmon experienced the same treatment. Jack spoke to one man who had, like him, received a tax demand and visits from the field force. Like Jack and other investors, he had tried to use Salmon to plan for retirement income, and had never had any intention of avoiding his tax obligations; on the phone he told Jack about the embarrassment and helplessness of being pursued for a debt he could not see any way of paying. The next time Jack called he spoke to the man’s wife, who told him he had killed himself. Jack told me he was in no doubt that the man’s death was caused by the tax charge and the way in which it was pursued by HMRC.
As he began to research the fraud, Jack was shocked to discover that the authorities could have prevented it from happening. In early 2010, months before he transferred his life savings to the Salmon scheme, HMRC had searched the offices of the scheme’s trustee and administrator, Tudor Capital Management. Warrants were issued for the arrest of Tudor’s directors, one of whom was a former adviser to HMRC. Shortly afterwards, the Pensions Regulator issued a determination notice that Tudor was suspected of “criminal activities” and that the assets of the Salmon scheme were at risk. But these judgements were kept from the public, and in June 2010 Jack and other investors transferred their savings to a scheme administered by people HMRC and the financial regulators already knew were criminals.
The main reason many pension fraud schemes appeared around this time was that the government had made it easier for them to do so. In 2010 the revenue swapped its previously robust verification measures for faster, less rigorous online registration, and a host of new schemes – registered with HMRC and the Pensions Regulator – popped up. (Schemes being registered with those bodies does not mean they are endorsed by them.)
While Jack was investing in Salmon Enterprises, Sue Flood was living in Spain. The European debt crisis was constantly in the news; Flood and her partner wanted somewhere safe to put their retirement funds. In an English-language newspaper, she read about a company that specialised in giving financial advice to ex-pats. The company’s managing director, Stephen Ward, was a former adviser to the government on pensions legislation, chief examiner for the G60 pension adviser qualification, and author of the industry reference guide, Tolley’s Pensions Taxation.
Flood contacted the company, Premier Pension Solutions, and was advised by Ward to transfer her and her husband’s savings into a new pension scheme called Ark. She looked into the companies involved and was satisfied that they were registered with UK regulators and authorities. She joined the Ark scheme in April 2011.
Jeremy Cornford, a financial adviser, also joined the Ark scheme after seeing a presentation by Ward at a golf club in Surrey in March 2011. Ward explained that the Ark scheme issued loans from one investor to another to allow early access to capital without incurring a tax charge. The crowd – about 80 finance professionals – questioned him in detail, but he wafted their concerns away; he literally wrote the book on pension taxation. “He was professorial,” Cornford remembers.
What Flood and Cornford didn’t know was that HMRC officials had already visited Ark’s offices in Wakefield to interview its founder, Craig Tweedley, and Ward. The minutes of the meeting show HMRC knew the scheme was risky and could incur a tax charge. But as with the Salmon scheme, HMRC refrained from making its concerns public.
Flood, Cornford and other members of the public poured £27m into the Ark schemes. Before the year was out, the Ark schemes had been declared “a fraud on the power of investment” in the High Court. Sue Flood lost almost £250,000, her retirement savings wiped out, but this was not the end. HMRC still considers her liable for a tax charge, not only on the money withdrawn but on all of the money that was stolen from her. The same is true for all the Ark investors.
There is no time limit on this charge, and it rises with interest. “They can come along 12 years later and give you a bill for it,” says Jeremy Cornford. “So you never know where you are with it. There is no closure for the victims.”
Like Jack, the Ark victims say they have been treated pitilessly by the revenue. Kim, a nurse from east London, was paid out £17,000 from the Ark scheme. “We didn’t go looking for this,” she told me; Kim and her husband were recommended the scheme by their financial adviser. They used the money to improve their home to care for a relative who was terminally ill. Since Kim started receiving a tax bill in 2012, her home has been visited repeatedly by third-party debt collectors; the bill now stands at £13,000.
“The treatment of the victim by HMRC,” says Cornford, “is actually worse than being defrauded.” But what angers them more is the fact that the promoter of the Ark schemes, Stephen Ward, was allowed to continue registering and promoting other schemes, in which hundreds more investors lost their savings. Ward was eventually banned from being a pension trustee in 2018, seven years after Ark was declared a fraud.
Jack, Sue Flood and Jeremy Cornford are among more than 1,000 pension fraud victims that HMRC is pursuing for tax liabilities, but hundreds, if not thousands, of other fraud victims are facing a similar situation.
In the summer of 2019 one of Rob Bentley’s friends said he’d recently got a rebate through a company called Max Tax. Bentley looked into the company: its website advertised the service as “HMRC approved”, and its Facebook page, followed by around 15,000 people, was replete with positive reviews. He used the government’s Companies House website to check its filings, and Google Maps to view its office. He called the company and spoke to its director, who told him he could be entitled to a rebate on his expenses, so he filled out an email form and sent a copy of his last pay slip.
A week or so later, Bentley received a letter from HMRC containing a code, which he forwarded on to Max Tax. He says he saw nothing in that letter about the risk he was taking in doing so. Without his knowledge, Max Tax then filed tax returns on his behalf which claimed that he had invested large sums in an enterprise investment scheme, or EIS. Venture capitalists can claim tax rebates for investing in start-up companies through these schemes, but Bentley isn’t a venture capitalist. He manages a service station.
It should have been obvious to HMRC at this point that something wasn’t right. The returns filed on Bentley’s behalf claimed that he, a PAYE employee on less than the median wage, had somehow invested almost twice his yearly salary in a company that no longer existed (the company, Cryoblast Solutions, was dissolved in 2018) and which had never actually been approved for EIS relief by HMRC. The returns specified that the rebates should be paid to another company, Fast Tax, which shared a director with Cryoblast. Bentley had never contacted Fast Tax or asked them to collect funds on his behalf. HMRC gave them the money anyway.
A few weeks later Bentley received a first payment of just over £1,300 marked “tax rebate” into his bank account. What he didn’t know was that this was only a third of what Max Tax had claimed on his behalf so far; the rest had been pocketed by the fraudsters.
In June 2020 Bentley received a letter from HMRC notifying him that his return was being investigated. Sources suggest that Max Tax may have filed hundreds of similar claims on behalf of other people, but despite this, HMRC told Bentley that he should show the letter to his tax adviser. So he did: he forwarded the letter to Max Tax, unwittingly alerting them to the investigation.
It took another six months for HMRC to send Bentley the details of what had been done in his name. By that time, Max Tax had disappeared: its website and social media profiles had vanished, its phone line was dead. Bentley spoke to HMRC and immediately offered to pay back all the money he’d received as a rebate. He sent everything he had on Max Tax to HMRC, Action Fraud and the police. However, he says this information has been used against him, to hold him liable for all of the money Max Tax took in his name.
For four years, HMRC has continued to demand the full liability – money Bentley never received, and which was claimed without his knowledge – of around £14,000, which continues to rise as interest is applied. For a father of three small children, this debt is a constant source of stress. HMRC has not given him any assurance that his details can’t be used again, to file more claims in future. He’s afraid to ask: “I try not to contact them, to be honest. I don’t trust them.”
More than one person described HMRC’s treatment of fraud victims as “a national scandal”, or “the next Post Office scandal”. People from all walks of life have been duped, defrauded or mis-sold investments or tax schemes, and it appears that in almost every case, HMRC’s assumption is that these people colluded with the people who took their money.
Others drew parallels with the tens of thousands of freelancers who used loan schemes, sold to them by accountants and financial advisers, to reduce their tax bills, and who have since received “loan charge” demands, often for sums they are unable to pay. In correspondence with the Treasury Select Committee in January, HMRC chief executive Jim Harra confirmed that ten people who had been subject to the loan charge have committed suicide.
Margaret Snowdon, president of the Pensions Administration Standards Association, told me it would cost about £20m for HMRC to give all victims of pension fraud an amnesty. This is a pittance compared to the tax settlements HMRC reaches with large companies. When HMRC settled out of court with General Electric in September 2021, for example, GE was allowed to walk away with an estimated discount of around $900m on its full liability. HMRC is far more supportive of overseas companies than it is of British citizens who have been victims of crime.
But then, the victims of crime are easy to find. One former tax inspector told me that when inspectors have to choose between a professional criminal – who may be overseas, hidden behind layers of corporate obfuscation – or an easily identifiable taxpayer, the “low-hanging fruit” is picked every time. Cases are then passed on to the collection side, which works separately and may have little or no understanding of the complexities of a case. “All of the training in debt management,” they told me, is geared towards “the assumption that you’ve got a deliberate and wilful defaulter”.
The result, over the years, is that a wall of silence has formed around a profoundly dysfunctional organisation. Snowdon has written to Rishi Sunak twice regarding the fate of pensions fraud victims, and received no reply. She has sent freedom of information requests to HMRC to ask how many, if any, fraud victims have been shown leniency: her request was turned down. But Sue Flood says she has met hundreds of people since she began offering to help fellow victims, and the answer is always the same: “I’ve yet to find anybody that has been shown any discretion, any humanity.”
An HMRC spokesperson said: “People should always be cautious about promises of easy money – if it sounds too good to be true, it probably is.
“We don’t tax pension savings lost to fraud and are sympathetic to those who’ve lost money. However, we have a duty to tax amounts individuals release, or attempt to release, from their pensions where not authorised in law.
“Taxpayers are responsible for tax rebates claimed on their behalf, but anyone concerned about their tax affairs should contact us. We’ll do everything we can to support taxpayers who engage with us to get their tax affairs in order, including offering payment plans.”
This report was originally published on 16 December 2023.
[See also: To catch a catfish]