Author “Harry Winter o MA (Cantab) ATTII AFA. Of Dental Business Solutions, Who are members of the Association of Specialist Providers to Dentist (ASPD) ASPD meber companies work together to provide comprehensive solutions, each member of the ASPD network is a dental industry specialist committed to overcoming challenges faced by dental professionals.
After reading History at Cambridge, Harry entered the accountancy profession and then became a member of the Chartered Institute of Taxation.
Since last summer the devastating effect of the banking crisis and the recession on the level of the National Debt has been headline news. Drastic measures have been called for in order to put this right. Chancellor Alistair Darling has stated his intention of halving this Debt within four years, and he needs something to work with. Since an estimated £3bn is lost each year through unpaid taxes, it is perhaps hardly surprising that this is one of the areas attracting attention. And so, not for the first time in recent months, the Revenue is to cast its net into this black hole and see what riches can be harvested.
Since the launching of the Taxpayers’ Charter in July 1986 the Revenue’s policy has been that it will treat taxpayers as being honest. The latest version of the Charter, published in November 2009, states that, unless there is a good reason to the contrary, they will presume that their ‘customers’ are telling them the truth, accept that they will pay what they owe, and only claim their correct entitlements. This of course does not prevent them from assiduously seeking these ‘good reasons to the contrary.’ There have been unofficial campaigns in the past particularly into cash based businesses (publicans, newsagents, milk rounds and so forth). However, the recent so-called ‘amnesty’ for disclosures of undeclared interest received into offshore bank accounts represented a departure in that for the first time a specific area of the economy was identified as being at risk from tax evasion and became the target of a publically announced campaign in order to plug the gap. A further opportunity to make disclosures in this area, the ‘New Disclosure Opportunity’, closed on 4th January 2010, and the Revenue will now seek to identify those who still have undisclosed offshore income and deal with them accordingly.
The Revenue is evidently pleased with the results of these campaigns because on 11th January 2010 it announced the ‘Tax Health Plan’ aimed at identifying undeclared income earned by members of the medical profession. At first this was thought to involve only doctors and others with a GMC registration, however on 19th January it was made clear that dentists (and others with a GDC registration) were also in the firing line. The Revenue’s serious intent here is borne out by an accompanying statement: ‘The message is clear; contact us before we contact you.’
So what are the features of the Tax Health Plan?
• The Revenue seeks to identify undeclared (and therefore untaxed) income earned by health professionals (including dentists) during the course of the last 20 years,
• The publicity is less clear on this point, but it is also possible that the Revenue will seek to indentify overclaimed business expenses (such as motoring expenses, use of home as office, wages paid to family members, travel and subsistence costs and so forth),
• Income which is disclosed under this plan will be subject to tax at the rate prevailing when it was earned plus interest dating from when the tax should have been paid plus a penalty charged at 10% of the tax disclosed,
• The Revenue must be made aware that a disclosure is to be made under the scheme by 31st March 2010,
• The full disclosure itself must be made by 30th June 2010.
The incentive here is the 10% penalty. Those who know they have undisclosed income in earlier years but make no disclosure under the Plan only for the income to be revealed by a subsequent Revenue enquiry will have to settle with a penalty charged at a much higher rate, possibly even as high as 100% of the unpaid tax. Further there is a risk that where the tax identified is higher than £25,000 the fact may be made public under the new ‘Naming and Shaming’ rules which are due to come into force in April 2010. This would not be a palatable prospect for a professional engaged in public practice.
How would Revenue officials identify a possible case?
• They have a power to demand details of income paid to medical professionals from NHS trusts, private hospitals and medical insurance companies,
• They have a power to demand details of interest payments made by banks (this is where the campaign on offshore interest payments originated),
• They may form an opinion that the profitability shown by the annual accounts is too low,
• They may form an opinion that the drawings shown by the accounts are too low to support an adequate lifestyle,
• They may receive anonymous information from a disgruntled third party,
• Some forms of income within a profession traditionally remain undisclosed (such as crematorium ‘Ash Cash’ fees received by doctors),
• Some annual accounts are enquired into each year at random.
Why health professionals?
• Simply because their incomes tend to be relatively high, as are the potential returns that the Revenue hopes to achieve as a result. If the campaign is successful then more will follow. Barristers, solicitors and accountants have been identified as possible future targets. O brave new World…!
If you feel that you may be affected by this development then you need to take professional advice. March 31st is only a matter of days away.
Harry Winter CTA of Dental Business Solutions, Who are members of the Association of Specialist Providers to Dentist (ASPD) ASPD meber companies work together to provide comprehensive solutions, each member of the ASPD network is a dental industry specialist committed to overcoming challenges faced by dental professionals.