You are here: Home - Retirement - Retirement planning - News -

Warning: pension liberation victims face 55% tax charge

0
Written by: Paloma Kubiak
25/01/2016
Victims of pension liberation scams who were told they'd pay no tax when accessing their pots early will be dealt a second blow as HM Revenue and Customs is due to send out tax demands of up to 55%.

People who tried to access their pension pot early during the 2011/12 financial year, and who were duped into thinking they wouldn’t have to pay any tax, will receive a ‘protective assessment letter’ between now and 5 April 2016 demanding up to 55% tax.

If you access your pension early (before 55 years old) you will be subject to an unauthorised payment tax, which is usually 55%, but according to HMRC charges can be as much as 70% of the value of the payments or investments made.

HMRC has four years to claw back the unauthorised payment tax. So those who transferred or liberated their pension pots in 2011/12 are now being targeted.

Campaign group ACA Pension Life, which helps pension liberation scam victims, says this move will deliver “a devastating hammer blow” to tens of thousands of pension scam victims who were conned by liberation scammers who told them they could access their pensions tax free thanks to a legal loophole.

In fact, they handed over their entire lifetime savings and now face mountainous debts plus tax demands which must be paid usually within 30 days if the assessment is not appealed.

The campaign group has seen a spike in the number of people falling victim to pension scammers since the government introduced its pension freedom reforms last April, allowing over 55s to access their entire pension pots.

I’ve been scammed, do I have to pay the tax?

If there’s a question mark over whether there’s tax to pay or how much must be paid, HMRC protects its position by issuing the assessment, i.e tax demand. The taxpayer then has 30 days in which to appeal, and if the protected assessment is not appealed within the 30 days then the tax must be paid.

HMRC says the bottom line is that people can’t access their pension pots early without paying tax and unfortunately, it will have to collect tax owed. A spokesperson adds: “We apply the tax legislation fairly and consistently in line with the rules but try to be as supportive as possible for those who have made a genuine mistake.”

It is possible to negotiate a time-to-pay arrangement with HMRC as few – if any – of the victims have the money to pay the tax, says ACA.  Most people who entered into these schemes did so only because they were assured it was 100% legal and there would be no tax to pay as it was a legitimate “loophole”.

ACA says that last year all the appeals it handled were accepted by HMRC, although this was only a temporary measure until the cases are heard by the Tax Tribunals and a judge decides how the liberations should be taxed.

‘It will ruin lives’

Angela Brooks, chairman of ACA said: “This is the horrific fate that awaits many.  It will ruin lives.

“It means not only have these victims almost certainly lost their hard-earned retirement savings, now they will owe HMRC a huge amount of tax.

“In addition, most also face other crippling debts and loans.

“To make matters worse, it looks as though HMRC is going to do exactly what they did last year – which is leave it until the absolute last minute to issue these letters.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

After an award-winning health insurance provider?

Winner of best online health care provider in the YourMoney.com Awards 2015

Insurance Experts: Are you fully insured? Click here to get a quote.

For a free quote or to speak with an insurance expert call 0800 1218744

First cash Lifetime ISA attracts 15,000+ savers in opening week

More than 15,000 savers opened the first-ever cash Lifetime ISA offered by Skipton Building Society in the ope...
First cash Lifetime ISA attracts 15,000+ savers in opening week

Tesco expected to post significant write-offs

Tesco is predicted to unveil the biggest loss in its 100-year history, according to analysts.
Tesco expected to post significant write-offs

Queen’s Speech 2017: Energy and motor bills to be cut but pensions ignored

The Queen delivered her speech today, setting out the government's priorities for the coming year, including m...
Queen’s Speech 2017: Energy and motor bills to be cut but pensions ignored

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

Tesco expected to post significant write-offs

Tesco is predicted to unveil the biggest loss in its 100-year history, according to analysts.

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
investment funds, fund sales
Investment funds hit record high in 2015 despite choppy markets

The amount of money in investment funds reached an all-time high in 2015, despite a tumultuous year for stock markets.

Close