Posts Tagged ‘Tax’

Doctors’ training costs: are they tax deductible?

By Jason Sharp - 17th October 2013 5:11 pm

Doctors often wonder whether training costs are tax deductible.

HM Revenue and Customs state that a deduction for training costs incurred by an employee will only be allowed if the employee concerned was directly employed on a training contract.

The training has to be an intrinsic part of the contractual duties of the employment.

HM Revenue and Customs provide the following example:

“A trainee doctor employed as a registrar on a training contract is required, as a stated contractual duty of the employment, to attend various external training courses.

“As part of the duties of the employment there is a mandatory requirement to maintain a national training number by attending a series of training courses and events.

“Failure to complete the course and obtain the qualification will mean that he cannot proceed to the next stage of his chosen profession.

“Attendance at the training events is an intrinsic part of the employment and one of the duties of the employment. The costs of travel to the events, course fees and other associated costs met by the employee are deductible.”

But, be warned, HM Revenue and Customs will also ask the doctor to demonstrate that failure to complete the training and obtain the qualification will mean that you will not be able to continue in employment with the employer in the role that would otherwise have been available to you after qualification.

Read more here.

Authored by Jason Sharp at Doctors Tax Limited and should be used for general guidance purposes only.

VAT guidance implications for medical companies

By Jason Sharp - 25th September 2013 5:32 pm

New guidance suggests that supplying medical services via a company may no longer be VAT exempt.

The guidance in VAT notice 701/57 states that if you are a qualifying health professional your services are exempt when both of the following conditions are met: 1. The services are within the profession in which you are registered to practise. 2. The primary purpose of the services is the protection, maintenance or restoration of the health of the person concerned.

However, in a recent tax case (Rapid Sequence Limited) HM Revenue & Customs (HMRC) have successfully argued that locum doctors provided to NHS hospitals via a medical agency was a taxable supply (not an exempt supply). As such the medical agency should apply VAT to their invoices.

The tax tribunal found that the VAT exemption only applies to the ‘supply of medical care’ and in this case the agency was supplying staff to the NHS not providing medical care.

This is a very worrying decision as it has been suggested that this is the first case in which HMRC have successfully argued that an EC Directive overrides UK legislation to the taxpayer’s detriment.

It is very early days but the immediate concern is how this ruling affects doctors who provide services through their own company. Whilst your own company is not a medical recruitment agency, will HMRC now argue that this structure is just the same as that of Rapid Sequence Limited? i.e. the supply of staff by a company.

If you are using a company as your business trading vehicle it would be prudent to review the VAT position as a matter of urgency.

A further consequence of the decision is that businesses could be subject to VAT assessments in respect of its past supplies.

The tax tribunal actually said: “We would understand if Rapid Sequence finds this outcome highly unsatisfactory.” HMRC has accepted that the wording in their guidance is “unfortunate” and “problematic” and the tribunal commented that they hoped HMRC will view Rapid Sequence’s position sympathetically - whatever that means.

Authored by Jason Sharp at Doctors Tax Limited and should be used for general guidance purposes only.

1,000 doctors and dentists targeted over tax evasion

Telegraph - 23rd June 2012 2:54 pm

The tax authorities have launched “civil investigations” against medical professionals after intelligence suggested widespread abuse.

In some cases HMRC is considering launching separate criminal investigations against some of the doctors and dentists.

The latest campaign was launched in 2010 and has uncovered a series of complex schemes used by medical professional including use of off-shore accounts and payments made by insurance companies.

It comes as Treasury figures show that £13.1 million has been clawed back from more than 2,000 medical staff since the HMRC launched its crackdown.

One doctor has paid back more than £1 million.

Read more in the Telegraph.

A column as controversial as a non-emergency phone line

By Jerry Nelson - 23rd February 2012 2:02 pm

Jobs for the boys

So, more than 25 senior DoH staff have their salaries paid to limited companies, in order to avoid minimize their tax burden? Very nice too, but what really struck me was the statement that ‘the 25 were not civil servants, or technically even staff, although a large number have been employed by the department for many years and hold very senior positions’ (my italics). Now I yield to no-one in my contempt for the DoH, but I have to say that in this case, I do feel a grudging sense of respect - they have clearly got their shit together, as I believe the young people say, when it comes to greasing the palms of their top people. And that reference to them not ‘actually’ being members of staff rang a few bells with me. I can think of more than one senior consultant colleague in the Middle Bit of England Trust who adopted a similarly semi-detached view of their NHS responsibilities. I suspect that, very soon, Andrew Lansley will also be ‘not actually a member of staff’ at the DoH, ‘technically’ or otherwise.

Keeping abreast of the PIP campaign

I think I may have mentioned the PIP implant furore in this column previously. But, it’s an important story so I am going there again (and not just because I’m breast obsessed and see an opportunity for easy journalistic double entendre). Sixty recipients have marched on the capital demanding action. Still, I’m pleased to see that in some parts of the country the boys are cashing in on the hysteria. And given the most common reason for a lady to want bigger knockers, am I the only person to think it appropriate that the industrial grade silicon in the PIP was really intended for mattresses?

Is this a joke?

Why do I even ask - I know the answer. There is, apparently, ‘concern’ over the roll-out of the new 111 phone service. This service is designed for patients with - wait for it - non-emergency conditions. FFS!! Given that the neurotic morons composing 50% of the population already call the pre-existing emergency number (999, in case you have forgotten) because they have mislaid the remote control for their Sky box and want to record TOWIE, what the hell are they expecting to hear about over a non-emergency line? Dissatisfaction with the colour of their 3-piece bloody suite; orders for chicken tikka masala and fifteen pints of Cobra? Jeez! - talk about making a rod for your own back. I’d be concerned as well, if I gave a toss.

Lassies who inhale

Well of course more women in the north of England smoke during pregnancy than in London. For a start, they have to produce stunted children, otherwise they won’t fit up the chimneys, and they are already inhaling so much smoke as they clog their way through the grim terraced streets that a few fags don’t make much difference. Then there’s all that black pudding, and whippets crapping all over their beer-stained carpets. Frankly, it’s a wonder that any of the poor little buggers just have the one head when they pop out.

Och aye the noo etc

Now I may have given the impression in the past that I am not altogether convinced that my future lies north of the border. However, it seems that there is now a shortage of doctors in some of the more remote regions, including Islay. I am prepared to make myself available to work in the following areas of that beautiful island: Laphroaig; Lagavulin; Bowmore; Bruichladich; Bunnahabhain; Ardbeg or Caol Ila (I’m not sure they are all actual places, Jerry - Ed). If I’m slow to answer the phone in an emergency, give it twelve hours or so, then try again. No rush, but ideally, I’d like to be in post before Port Charlotte opens up again.

Department of Health apologises over staff tax deals

The Guardian - 16th February 2012 12:06 pm

The Department of Health has apologised after documents sent to the Guardian showed that contrary to assurances given to parliament, more than 25 senior staff employed by the department are paid salaries direct to limited companies, with the likely effect of reducing their tax bills.

In some cases, the documents show the named individuals are being paid more than £250,000 a year, as well as additional expenses. The payments amount to almost £4.2m in one year.

The department claimed the 25 were not civil servants, or technically even staff, although a large number have been employed by the department for many years and hold very senior positions. It said the arrangements will be subject to review by the Treasury.

Read more in The Guardian.

When can a consultant claim for their threads?

By John O’Leary - 24th October 2011 8:40 am

A common gripe amongst hospital consultants is that they are not entitled to tax relief on the cost of their daily clothes. The basis for such treatment goes back to an infamous tax case where it was decided that most clothing for purchased for warmth and human decency rather than to aid a profession.

You will have to pay a sizeable amount each year to be turned out in a manner fitting to your position, yet the Revenue (HMRC) will not be impressed and will almost always seek to deny tax relief. The situation is the same regardless of whether you have a pure NHS role and/or a private practice.

The medical profession do get through suits at a much faster rate than an ordinary office worker, no doubt aided by the amount of vomit and dry cleaning that can be a part of daily life, but this does not create a sympathetic reception from the powers that be.

Above it was stated that HMRC ‘almost always seek to deny tax relief’, so does that mean that there are cases where clothing can produce an acceptable claim for tax relief? Yes, but the cases are limited. Occasionally you will come across consultants who have purchased their own medical shirts and had their name/position embroided on the item. Such shirts are purely for business purposes and can be claimed, but only via a private practice.

In rare cases some private clinics charge their surgeons for the hire of theatre clothing, and again this will be relievable for tax purposes.

For the most part consultants need to resign themselves to not claiming anything for the purchase of their clothing, but they should be claiming for dry cleaning through a private practice.

John is a specialist in the taxation of hospital consultants with Medic-Tax. John can be contacted at jo@medictax.co.uk

When’s a payment an honorarium and tax exempt?

By John O’Leary - 27th July 2011 12:47 pm

There is a type of payment that is becoming common to consultants - the honorarium.

An honorarium is a payment that is made without expectation or obligation, and is normally a gesture to recognise the activities that have been provided by an individual rather than as a payment for services rendered.

True honorariums are exempt from tax.

If a consultant provides their time, for instance on lecturing to institutions or hospitals, and does not expect or invite any reward for their activities, a payment made as a gesture of gratitude should be exempt from tax. If, however, a consultant has links with a business and provides services for which he would normally expect to be paid, such remuneration is taxable.

The problem we have is that many businesses are making use of the consultant’s time and subsequently make a payment marked as an honorarium. We then come back to the very useful principle that “if something looks like a duck and quacks like a duck, then…”. The act of calling a payment an honorarium does not automatically make it so. If it was that simple we would have the word stamped on every payslip and no one would pay income tax again.

So, what happens if you did some lectures or articles last year and received payments marked as honorariums? You probably have a good feeling as to the true nature of the payment. There are some simple tests, for example, would you have undertaken the activity for no payment at all and is it customary to be remunerated for such services?

If you feel it was an unexpected goodwill gesture, then by all means exclude it from your tax return. If your only rationale is that you have a piece of paper stating that it is an honorarium, you could be in for a bumpy ride if you do not declare it.

John is a specialist in the taxation of hospital consultants with Medic-Tax. John can be contacted at jo@medictax.co.uk

Pros and cons of trading as a limited company

By Jason Sharp - 1st July 2011 3:11 pm

Over the last few months the telephone has not stopped ringing with the same question being posed to me.

“I have heard from one of my colleagues that if I trade as a limited company for my private practice or locum work I will save £000’s in tax” - is this true?

In some cases this statement is true and in others the savings are negligible. One size does not fit all and tax savings will depend on a number of issues such as:

· Level of your private income;

· Could a non working or lower earning spouse be involved in the company?

· Will you be extracting all the company profits?

The good news is if structured correctly substantial savings can be achieved and you could reduce a personal tax and National Insurance rate of 51% to just 10% which is obviously very attractive.

I appreciate that this may seem too good to be true but there will be many of your colleagues already benefiting from this.

So how is this achieved? Your existing private practice has a value and it is this value (including goodwill) that is sold to the new company. As you will have sold your personal trading business, this will crystallise a liability to capital gains tax at a rate of 10% due to the availability of ‘entrepreneurs relief’.

If the value of your personal private practice was say £100,000, then you would have a capital gains tax liability of £10,000. If the sale takes place in July 2011 then this would not actually be payable until 31 January 2013.

Obviously the new company would not have £100,000, so this would be money owed to you and can be repaid by the company tax-free potentially avoiding 51% tax and National Insurance for a number of years.

As an additional bonus the new company may be able to write off the goodwill for tax purposes over a number of years thus reducing the company’s Corporation Tax liability.

The pitfalls are few are far between but care needs to be taken not to overvalue your private practice as this could result in significant personal tax liabilities. Given the potential tax savings highlighted I am sure you can see why HMRC are keen to ensure valuations are accurate.

Jason Sharp is contactable at www.doctorstax.co.uk. This article should be used for general guidance purposes only.

Annual tax returns - submit, or not submit?

By John O’Leary - 4th May 2011 10:28 am

If you have a private practice, you will need to submit annual tax returns.

If, however, you rely solely on your NHS salary, you may have received a cheerful letter from the Revenue (HMRC) stating that you no longer need to submit annual tax returns.

This has got to be good news hasn’t it? No, not necessarily. For one thing, should you have a tax liability the onus is still on you to report it to HMRC. This may seem a little surreal - you have a document saying that you need not submit a tax return, but this gives you no protection whatsoever in the event of having an unexpected tax liability.

The other thing to remember is that the tax return is how most of us claim for work-related expenses. We all know that the scope for claiming is small when compared to what you can do through a private practice, but you will still be paying for various professional subscriptions and your insurance, and these can be offset against your NHS income.

If you stop filling in tax returns you may soon find that HMRC ‘overlook’ your expenses and you are hundreds if not thousands of pounds out of pocket. You can inform your tax office that you wish to claim relief, but this can be a struggle.

So, being released from the self-assessment tax system could be a case of ‘one step forward, two steps back’.

John O’Leary is a specialist in the taxation of hospital consultants. He has recently joined Medic-Tax from Sheen Stickland, and can be contacted on jo@medictax.co.uk

Private practitioners should check NI payments

By Rose Landinez - 14th February 2011 10:11 am

If you are a NHS consultant with a private practice, the next time you look at your bank statement you might like to check for payments of £9.60 every four weeks to the National Insurance people. If you are paying such sums (known as Class 2 NIC), there is a good chance your tax affairs are not as they should be.

Nearly all consultants will pay such a large amount of National Insurance on their NHS earnings that they are not required to pay any Class 2 contributions for their private work.

Whilst paying an unnecessary £125 a year is not a great idea, it points to a far larger problem with another sort of National Insurance where the sums can be really interesting - Class 4.

If you have not obtained deferment from Class 2 NIC, you will probably be paying Class 4 at a much higher rate than you should. These payments are made via your tax return. You could be looking at unnecessary payments in excess of £3,000 a year.

Thankfully Class 4 NIC can be reclaimed. Although hardly a simple task, it can be rewarding when a cheque for many thousands of pounds is delivered in your hands.

Having secured the appropriate refund, you will then want to ensure that the same problem does not occur in the future. If you do not have an accountant, a trip to the HMRC website will prove useful.

Rose Landinez runs Medic Tax, which are specialists in the taxation of hospital consultants. To contact her email info@medictax.co.uk