Posts Tagged ‘Tax’

Food and entertainment are off the tax menu

By Rose Landinez - 3rd September 2010 10:50 am

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.

Rose Landinez runs Medic Tax, who look after consultants in London and the south east. To contact her email info@medictax.co.uk

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Final warning as Revenue runs out of patience

Healthcare Republic - 27th July 2010 3:58 pm

Doctors with undisclosed tax problems have been urged to come forward “quickly” after only 1,500 of a potential 30,000 medical professionals took advantage of a tax amnesty scheme.

Earlier this year the HM Revenue and Customs launched its tax health plan (THP) sending letters to 30,000 medical professionals that it believed could have potential problems with their tax.

It said that if doctors come forward voluntarily face they will face a tax penalty of just 10% of the amount of tax owed.

If they do not take the opportunity offered under the THP, doctors could face a maximum of 100% of the tax owed (on top of full repayment of the debt and interest charged on it).

The Revenue is now urging more doctors to come forward ahead of 1 August before full investigations begin.

Read more at Healthcare Republic.

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New tax changes for higher earning doctors

By Justine Roberts - 21st April 2010 11:05 am

We are in a new tax year and are shortly to have a new government in power. We do not know who it will be, but in many respects it is going to make little difference. There are already a raft of tax changes that have just taken place at the start of this tax year or will commence at the beginning of the next tax year.

Any new government is able to reverse tax increases or stop them being implemented, but pragmatically this isn’t going to happen. With the economy in such massive debt any tax increase that can be blamed on a former government will not be changed as any new government will need to raise extra finance anyway!

The major headline grabbing change is the introduction of a new higher rate tax band of 50% for all those who have taxable income over £150,000. Perhaps as important but lesser known is the changes to pension tax reliefs.

Many of the changes to pension tax relief do not come into effect for a further year. However, it is easy for any doctor making pension arrangements to fall foul of these rules early.

From 6 April 2011 anyone with ‘total’ earnings over £150,000 will no longer receive full higher rate tax relief on pension contributions. A doctor earning £130,000 in the NHS will have a total income under this assessment of £159,250 after all pension contributions are added back in, meaning that higher rate relief is in part lost.

When these rules were introduced there were also ‘transitional rules’ that came into being to ensure that higher earners did not make large pension contributions in this tax year in order to avoid the rules.

So what does this mean to a doctor?

All doctors earning over £150,000 will from the beginning of the next tax year lose higher rate tax relief on pension contributions. This applies to the NHS superannuation plus any added years, additional pensions, AVCs or personal pension arrangements.

It is therefore in the best interests of doctors who find themselves in this situation to cease any additional pension planning from the beginning of the 2011/2012 tax year. There is no point making a pension contribution that only receives basic rate tax relief to then have to pay higher rate when it is received in retirement.

Doctors who currently earn over £130,000 should be very careful about making any additional pension arrangements from now. It is highly likely that higher rate tax relief will be declined on any new arrangements that are made.

With the changes in taxation taking place we will all pay more in tax, however higher earning doctors should be especially careful with their pension arrangements as they could well prove to be more expensive and less tax efficient than expected.

Justine Roberts is a director of Medical & Financial Ltd and can be contacted on 01400 250525 or at justine@medicalandfinancial.com

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Don’t get caught out by the tax man

By Michael Hankey - 14th March 2010 2:59 pm

Her Majesty’s Revenue and Customs (HMRC) regularly carries out concentrated operations on various groups of taxpayers whom they suspect of making incorrect returns of their income.

The latest group to come under the microscope are doctors and other medical professionals.

Under the Tax Health Plan, which was announced in January, doctors and dentists who have failed to disclose all their earnings have until 31 March 2010 to notify HMRC that they wish to make a disclosure. They then have a further three months to 30 June to submit it their disclosure and make full payment.

All the HMRC needs to begin an enquiry into an individual’s tax affairs is a ‘suspicion’ that there may be items declared incorrectly or not declared at all. It is then up to the taxpayer to prove them wrong - ‘innocent until proven guilty’ does not apply to HMRC enquiries.

It can get even worse. It is often the case that if something makes HMRC think a taxpayer does merit an enquiry, they will not stop at a single year. The current year and the six previous years can all be brought into consideration.  

You are probably now thinking that this could not apply to me but think again. Have you declared all the money you have received from cremation form fees and similar items? What about locum work? Have you declared all of it on your tax return?

 You might be thinking that because your locum agency work was taxed at source you are in the clear - think again, it might not be taxed at the correct rate leading to an underpayment of tax. Remember, this is your responsibility not the taxman’s nor the agency’s.

Come to that, have you completed tax returns? If you have extra income the responsibility is on you to make the declaration not upon HMRC to ask you to do so.

It isn’t all gloom and doom. There may be items which you can claim against your tax which you haven’t thought about. You may even have been overpaying tax in your main job which happens more than you might think.

If you are in any doubts at all, go and ask for some professional help in looking at your tax affairs - it could well soften any nasty shocks and you may even be pleasantly surprised!

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

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Doctors pose serious tax risk, says HMRC

Healthcare Republic - 10th March 2010 10:59 am

There are solid grounds for targeting doctors and dentists who have not declared all their income, according to HM Revenue and Customs (HMRC).

Speaking in London last week at a roundtable discussion about HMRC’s Tax Health Plan (THP), permanent secretary for tax Dave Hartnett said: “A common feature of all our campaigns is that they address a sector or a group where there is a serious tax risk.”

Under the THP, which was announced in January, doctors and dentists who have failed to disclose all their earnings have until 31 March 2010 to notify HMRC that they wish to make a disclosure. They then have a further three months to 30 June to submit it their disclosure and make full payment.

If they do this, the tax penalty they face is just 10% of the amount of tax owed. If they do not take the opportunity offered under the THP, Mr Hartnett said HMRC would go after the individuals concerned across the country, using the information that it holds about them.

Hartnett said: “We’ve risk assessed doctors and dentists and we’ve found there is a material level of non-compliance in various ways”. He added that HMRC had obtained data suggesting that the problem for this group was bigger than it had first thought.

Read more at Healthcare Republic.

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