The economic downturn is having far reaching consequences for hospital doctors.
Not only is it threatening the funding of their services, and their pay rises, for years to come, it has also prompted an inquisition into their financial affairs.
In these lean times, Her Majesty’s Revenue and Customs (HMRC) are under pressure to collect as much of our taxes as possible. With the country’s mountainous debt, every penny is needed.
You might have thought that when tracking down those professionals who have underpaid tax, it would have initially focused its energies on those who helped to create the economic crisis. Bankers and city speculators would have been top of my list.
But the HMRC has taken a different approach. For some undisclosed reason, doctors are at the top of their list.
It’s offering a three-week ‘amnesty’ - called a Tax Health Plan - for doctors who may have underpaid tax in the past to rectify the situation.
Doctors who make a voluntary disclosure will be asked to pay the full tax they owe and a penalty of up to 10% - and the Revenue has made it very clear these will be the best terms offered.
From April 2010, the HMRC will investigate doctors they believe have not declared their full income, dating back up to 20 years.
The Revenue is playing its cards close to its chest. As well as not explaining why its targeting doctors first, HMRC is also coy on the number of doctors involved in tax fraud (unofficial figures suggest 800) and the amount it wants to recover.
It briefly consulted with FIPO, BMA, HCSA and the GMC at the end of last year so one can surmise it is particularly interested in consultants with significant private practices.
Mike Wells, HMRC’s director of risk and intelligence, explained: “Our aim is to make it as easy as possible for people to come forward, make a full disclosure and benefit from the certainty of a reduced 10% penalty that HMRC is making available to those who qualify for this opportunity.
“From April we will be using the information at our disposal to investigate medical professionals who have not declared their full income. I therefore strongly urge any in this group who think they may have outstanding tax liabilities on their income to get in touch with HMRC and get their tax affairs in order simply and on the best available terms.
“This is the first step in enabling those with undisclosed income or gains to avoid a full tax investigation together with much higher penalties. The message is clear: contact us before we contact you.”
There’s no doubt the HMRC is adopting a tough approach. If a doctor has undeclared revenue, and ignores the Tax Health Plan, they could face an additional penalty ranging from 20% up to 100% of the tax due, and face an investigation that could result in criminal prosecution. It would question a doctor’s probity and be reported to the GMC.
If the doctor in question has evaded over £25,000 of tax, they will be ‘named and shamed’ with their details being published on the HMRC website and distributed on a press release to the media.
While not wishing to excuse any doctors who have avoided paying their tax and broken the law, the way HMRC is going about collecting unpaid taxes rom professionals raises some questions.
Consultants have from now until 31 March 2010 to register their intention to make a voluntary disclosure with HMRC. By 30 June, those who have registered must have made their disclosure as well as arrangements to pay all tax interest and penalties due.
That deadline doesn’t take into consideration the potential complexity of their financial arrangements, particularly if they’re contested. The HMRC will not give them any further time, which is unlikely to instil confidence in the process.
Furthermore, there is little information available for private practitioners working in group and partnership arrangements. Is one partner liable for the tax fiddling of another, for example?
It’s unacceptable that the Treasury loses an estimated £3bn a year in tax evasion, but is the HMRC offering enough of a carrot for tax evading doctors to come clean and save itself the time and effort of an investigation?
Some accountants and legal experts suggested the campaign will provide ‘easy pickings’ for the Treasury. Unlike bankers and lawyers, doctors don’t have the same level of expertise to call on in hiding any undeclared revenue.
The line from representative organisations, such as the BMA and HCSA, is consistent and clear: doctors who have concerns should consult their financial advisers to ensure their tax affairs are in order.
Stephen Campion, chief executive of the HCSA, said: “We are grateful that at least HMRC consulted with us to alert us in advance but the HCSA is not associated with, or party to, this campaign.
“However we do advise all hospital consultants and senior doctors to be aware of the HMRC campaign and take professional financial advice if at all concerned about tax liability and accuracy of self-assessment.”
To make a disclosure ring HMRC on 0845 600 4508, or use the e-form available via the HMRC website.
Tags: finance, Private practice
One-way ticket to the Cayman Islands please and make it snappy…