Medical professionals under HMRC’s microscope
Thursday, January 14, 2010
| Posted by: Dave Jennings
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Protecting your wealth
| Tags: tax,
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disclosure,
tax amnesty,
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Before the ink is dry on HM Revenue and Customs’s (HMRC) offshore ‘tax amnesty’, it announces another one, but this time one specifically targeted towards a particular business sector: the medical profession. HMRC has called its latest tax-gathering baby, the Tax Health Plan (THP). This is the first time HMRC has offered an ‘amnesty’ to defined taxpayers and it is likely to be the first of many – read on to see if you’re in the sector that’s likely to be targeted.
Is there a doctor or dentist in the house?
The press have picked this up as an attack on the middle classes. HMRC is in the process of collating further information from NHS trusts, private hospitals and medical insurers about payments made to medical professionals. It will then cross check this information against tax returns made by consultants, surgeons and doctors, etc, to ensure there has been a full disclosure of all of their income.
HMRC has investigated medical professionals before, looking for undeclared income from such sources as private fees or ‘ash cash’ (crematorium fees), and also on the proportion of business expenses claimed, but they were always one-offs per individual. Now HMRC is attacking the whole sector and giving the qualifying individuals the chance to come forward before HMRC starts investigations that could lead to criminal prosecutions.
Should everyone have access to the same tax vaccine?
It could be said that this is not fair to other taxpayers, or similar high earners. ‘Why doesn’t HMRC issue a general tax amnesty?’ you may ask.
HMRC’s likely response would be that anyone can make a disclosure at any time if they need to. However, the terms of that disclosure may not be as reasonable as those of the current ‘amnesties’. Penalties may be higher or the Inspector may expect a higher burden of proof for expenses or estimates.
However, in my many years of working in tax investigations on both sides of the Revenue fence, it is possible to obtain similar settlements to the ones envisaged by the THP.
What does the THP involve?
A disclosure under the THP will have to consider all taxes, including inheritance tax and all income, not just from the medical profession but also investment income, such as interest received or capital gains made. The past 20 years have to be reviewed and in addition to an interest charge for the late payment of tax, a penalty of 10% should be included.
If a taxpayer does nothing and waits for HMRC to come knocking, the penalty is likely to be a minimum of 30% of any tax due. A quicker, controlled, disclosure may also be less painful than a lengthy intrusive investigation by an Inspector.
Will other high earners be next?
It is highly likely that this won’t be the last targeted ‘amnesty’. HMRC wants to be seen to offer an ‘enabling’ culture and the Treasury needs tax receipts as urgently as possible to reduce public borrowing. Therefore, we can expect to see further announcements from HMRC for other sectors, possibly barristers, landlords, architects or even accountants!
If you can’t wait to see if your sector is going to be offered an amnesty and would like a free consultation with one of our tax investigation specialists, please do get in touch.
Image: © Tim Brauhn, 2009
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