Steven Mugglestone

The more I learn, the less I know

Medical Professionals Encouraged to Come Clean:

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Medical Professionals Encouraged to Come Clean

Again following on from our recent posts,

  • “HMRC Target landlords, fast food retailers, construction workers and late filing”  http://wp.me/pQyUg-5H
  • “It is only a matter of time until HMRC finds your undeclared income!”  http://wp.me/pQyUg-4H
  • HMRC are targeting undeclared income for private tutors & coaches.  Act now to avoid hefty penalties: http://lnkd.in/ZkCNuU

HM Revenue & Customs (HMRC) has announced a new facility called the Tax Health Plan (THP) aimed at doctors and dentists to provide an opportunity to “come clean” and disclose all previously undeclared income in return for a reduced penalty.

HMRC has used its information powers to obtain information relating to medical professionals from various sources including NHS trusts, private hospitals and medical insurers and is now in a position to match that information against the returns of income made of medical professionals. There is now a window of opportunity to make a full disclosure and benefit from a reduced penalty before HMRC acts on this information.   We would encourage all relevant medical professionals to seek help and to come clean now.

Who it effects

As part of the registration process there is a need to provide the General Medical Council (GMC) registration number or the General Dental Council (GDC) registration number.   All members of the GMC and GDC are therefore covered. It is not clear whether the THP extends to medical professionals who are members of other professional bodies but we are recommending that those in such a position should seek advice.

How does the THP work?

The medical professional (or their agent) must notify HMRC of their intention to make a disclosure. This should have been done by 31 March 2010.

Notification can be made by phone (0845 600 4508) or by post (HM Revenue & Customs, Tax Health Plan, Holland House, 20 Oxford Road, Bournemouth, Dorset, BH8 8DZ) or by email: http://www.hmrc.gov.uk/tax-health-plan/

Following notification HMRC will send an acknowledgement letter as soon as possible. If you have missed the deadline, you should seek specialist advice.

Disclosure

It will then be necessary to prepare and submit the disclosure. The deadline for this is 30 June 2010.

There are a number of steps to preparing the disclosure:

  • Establish the undeclared income, profits and gains for each year where there are unpaid liabilities
  • Apply the rates of tax and/or National Insurance Contributions against the taxable income, profits or gains for each year
  • Calculate the interest and the penalty.  In most cases this will be a flat 10% of the additional tax and NIC liabilities. Where the unpaid liabilities are less than £1,000 no penalty will apply, although it will still be necessary to pay the tax, NIC and interest. The penalty is 10% of the additional tax and/or National Insurance Contributions. It is not applied to the interest.
  • Add the additional tax and/or National Insurance Contributions to the interest and the penalty to calculate the summary of what the person owes.

What information must be contained in a disclosure?

Each disclosure must contain the following:

  • Disclosure of at least one unpaid tax or duty
  • A summary of all taxes and/or duties, interest and penalties due for up to 20 years
  • Details of sources of undisclosed income that are relevant to the disclosure
  • An offer to pay (this forms a contract with HMRC)
  • A declaration that the disclosure is correct and complete to the best of the persons knowledge and belief
  • Payment of the full liabilities disclosed, including the interest and the penalty

Where is the disclosure be sent?

The disclosure must be submitted to HMRC in writing to:

HM Revenue & Customs
Tax Health Plan
Holland House
20 Oxford Road
Bournemouth
Dorset
BH8 8DZ

How is the outstanding liability paid?

Payment can be made by a number of methods:

  • Direct debit or credit card (over the internet)
  • Via the BACS system
  • At the bank
  • At the post office
  • By post

What if the person cannot pay?

If the person cannot pay the full amount they should contact HMRC as soon as possible and before the disclosure deadline of 30 June 2010 on 0845 600 4508

Is there a risk of prosecution?

There is always a risk of prosecution when someone has not declared all their income to HMRC. HMRC will not provide a guarantee that a criminal investigation will not take place under the THP but it has stated that this is likely only to occur where the underlying income is the proceeds of serious organised crime (other than undeclared for tax).

If a medical professional is particularly worried about prosecution he may wish to consider making the disclosure under HMRC Code of Practice 9 which, if offered, provides a guarantee of no prosecution in return for a full and complete disclosure. HMRC is likely to seek a higher penalty under COP9.

Are any disclosures unlikely to be accepted through the THP?

HMRC have stated that a number of disclosures will not be accepted under the THP:

  • Disclosures found to be materially incorrect or incomplete when checked by HMRC for accuracy and completeness
  • Disclosures for customers where HMRC has already begun an investigation or enquiry into their tax affairs prior to THP
  • Disclosures where HMRC believes the money is the subject of serious organised crime

What about income other than undeclared earned income?

The disclosure made under the THP should cover ALL sources of undeclared income. However, if there is no undeclared EARNED medical professional income the disclosure will not be part of the THP and so the fixed 10% penalty will not be available.

Although not qualifying for the 10% fixed penalty ANY unprompted disclosure will warrant significant mitigation on penalties.

What about Errors?

If the additional liability arose due to a genuine innocent error eg the person was provided with incorrect information from another source eg the NHS trust, then the person may be able to reduce the penalty to nil.

If planning to take this approach for the THP HMRC has asked that this should be discussed with it at the address above or on 0845 600 4508. If this is not done prior to filing the THP disclosure HMRC may reject the disclosure.

What if the person does not disclose?

HMRC has stated that it will start to review the information it holds after 31 March 2010. It will also continue to seek to secure new information.

It will match the information against the returned income of the medical professional and if it finds that it is not accurate it will open an enquiry or investigation. Anyone found to have not declared under the THP faces higher penalties (at least 30%, but could be up to 100%). In the most serious cases HMRC will consider commencing a criminal investigation.

Does the Medical Professional have to disclose this to the GMC?

HMRC has confirmed the tax affairs of the medical professional are confidential. It is down to the medical professional to make any necessary disclosure to the GMC.

The medical practitioner has an offshore bank account that he did not disclose under the NDO, can he use the THP?

HMRC has stated that person should have used the NDO and so it appears that opportunity has gone. However, if the offshore account contains the undeclared earned medical professional income, whilst HMRC has not stated this, we would expect this opportunity to allow for that disclosure.

What years does the THP cover?

The THP covers the 20 year period to 5 April 2008. If the person has undeclared income after that date they should include this in the 2009 return, if relates to 2008/9 (deadline 31 January 2010).

Can Estimates be used?

Where accurate information is not available HMRC will allow the use of reasonable estimates.

Can additional deductions be claimed?

If there are valid deductions to be made to the additional income being declared this is allowed. When making any disclosure it is always worthwhile checking to see whether there are any unclaimed amounts/reliefs.

What if the person is claiming Tax Credits?

If the person (or their partner) making the disclosure is claiming Tax Credits, the disclosure forms require a tick in the appropriate box so that HMRC are aware of this. If this is in point speak to your local contact.

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

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steven@mcgregorsbirmingham.co.uk

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Written by Steven Mugglestone

November 21, 2011 at 12:52 pm

Posted in HMRC, Tax

Tagged with , ,

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