Judges are taking the tax man to task over how retirement savers caught up in pension liberation schemes are chased with penalties amounting to thousands of pounds.
The courts believe HM Revenue & Customs should probe the fraudsters behind the schemes rather than the often unwary savers.
Two recent cases highlight the way HMRC is dealing with pension liberation cases.
Both involved disgraced provider Fast Pensions and Blu Funding Corporation, a company linked to Fast Pensions. Blu provided loans to retirement savers paid from investments sourced from pension transfers made by Fast Pensions.
The judges accepted in each case that the savers did not know the two providers were linked; considered the pension transfer and loans were separate transactions and did not intend to take money from their pensions early.
However, the outcomes were different for each saver.
Judge’s plea to HMRC
In Gary West v HMRC, the First Tier Tribunal heard an appeal by West against a tax assessment of £4,460. The appeal was rejected as the judge agreed HMRC could prove the loan came from his pension pot.
Judge Rupert Jones said: “The tribunal recognises that HMRC are required to enforce the law. Nonetheless, given the peculiar and exceptional circumstances of this case, the tribunal invites HMRC to consider whether there is anything they can do to mitigate the consequences of the assessment for the appellant and his wife.
“The enforcement of the assessment remains within the discretion of HMRC and the tribunal hopes that they will give careful consideration to exercising that discretion generously. Further, the tribunal understands that HMRC must target their resources. Part of their duty is to address and investigate unlawful pension liberation schemes, both the members who benefit from them, but also their orchestrators and promoters…rather than individuals.”
Victims treated unfairly
In Elizabeth Hughes v HMRC, the tribunal heard a similar appeal against a £5,500 tax assessment. The appeal was upheld as the judge felt HMRC could not prove the loan came from the funds transferred by Ms Hughes.
Judge Christopher McNall said: “HMRC says that 520 people were encouraged to transfer their pension savings from existing providers into schemes with Fast Pensions acting as the sponsoring employer. At least some of these cases have reached this tribunal. We do not know whether there 10 are others, but, on the numbers, there is a real likelihood that there are.
“We limit ourselves to simply observing that there is at least potentially a risk of the appearance of unfairness when HMRC, which, as a party to most cases before the tribunal, knows what decisions are made by the tribunal, whether those are short, summary or full, and knows the reasons for them, does not alert the tribunal and 15 appellants to other decisions made in cases which are strongly similar, involving the same law, and some of the same parties.”