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

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

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

All of us who work for a salary have a PAYE code which is, in theory, a way of making sure we all pay the correct amount of tax each month by deduction from our salaries. I say in theory because the practice can be very different and can produce some strange anomalies.

This is important because if it is wrong you could end up paying too much tax each month or, perhaps worse, you could find at the end of the year that you have underpaid and are faced with an unexpected tax bill.

In a normal year this can be bad enough but this year - since April - there are all kinds of other problems appearing.

Up until this year, everyone has received a flat rate personal allowance but now this varies with the level of your income with high earners losing theirs completely. As a rule of thumb, if you earn more than £100,000 your allowance will be restricted and if you earn more than about £112,000 it will disappear completely.

You may think that this doesn’t concern you as you don’t earn £100,000. Be warned, HMRC don’t always get it right - I have met with several cases recently where taxpayers earning nothing like that much were assumed to be high earners, often because they had a small second income from another source (such as occasional locum work).

This could mean you pay considerably more tax than you need to each month and, unless you take some action the position is likely to continue, particularly if you are still on a rotation and changing employers twice a year.

Even HMRC are now admitting that they are getting this wrong in a large number of cases, but don’t rely on anything you have overpaid being refunded automatically. It’s far better to take some positive action on your own behalf.

The moral of the story is to get some advice sooner rather than later because, as we all know, prevention is better than cure.

Michael Hankey is the tax team manager at Simpson Burgess Nash. He can be contacted on michael.hankey@sbnca.com

A common question from consultants is: “How much can I claim for food and entertaining?” At this point one’s heart sinks at the prospect of another tirade on how biased the tax system is against medics.

Clearly some doctors will need to explain how unfair the system is, how outraged they are that the expenditure does not attract tax relief, and how if they were running the country things would be quite different. They then settle down to explain just why HM Revenue & Customs have such a problem with entertaining and subsistence claims.

The basic principle is that a person pays for their food if they are not working, so why expect help from the tax system when someone eats on the job? The fact that people have to spend five times as much eating away from home or at their desk holds no sway with HMRC - the purpose of the lunch at Claridges was to obtain nutrition and what they were doing in London has no bearing on the matter.

We then move on to “taking some colleagues out for lunch to discuss cases, new practices, etc.” It is even harsher to deny relief under these circumstances, but HMRC will take the view that if it was necessary for a person’s employment to discuss such matters, the employer would make arrangements to cover the costs. The meal will therefore be viewed as a luxury that is not necessary to the performance of a doctor’s duties.

There are, however, some cases where food and entertaining can be claimed. If you employ secretarial staff, you may take them out to dinner and expect to obtain a tax deduction (as long as the annual value per person is less than £150).

If you are giving a presentation to a group of GPs, and hire a conference room and arrange a small buffet to supplement the presentation, this will normally be allowable.

Entertaining expenses are easy pickings for HMRC. If a consultant is in the habit of claiming the costs and normally get away with it, they could be storing up trouble. The rules on entertaining are fairly clear in most cases, so if you do claim in a gung-ho fashion the consequences can be dire.