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HMRC has just unveiled a new tax disclosure facility for medical professionals. The Tax Health Plan (THP) will operate in two stages:

  • From 11 January to 31 March 2010, medical professionals can 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.
  • If HMRC receives a full and accurate disclosure of any income on which tax hasn’t been paid, along with payment, by 30 June, those who qualify can expect a reduced penalty of 10 per cent.

HMRC has been targetting hospital consultants in recently, according to reports from tax advisers and insurers Abbey Tax Protection.

Common errors made by medics include:

    • Failing to return income from all sources (different medical contract income, earnings from other hospitals, locum income, additionally non-work related income, such as rental and savings income).
    • Not operating IR35.
    • Overclaiming expenses such as:
      Working from home (as self-employed or in partnership with spouse)
      Working from home (as an employee)
      Travelling (self-employed)
      Travelling (employee)
      Wife's wages

      Expenses such as training fees and associated costs need to be reviewed carefully in the light of recent tax tribunal decisions.

Is a 10% penalty fair compared to HMRC's tax penalty regime?

      Under the THP there will be a 0% penalty if the error or mistake which makes up the disclosure is caused by innocent error. If the error or mistake comes to under £1,000, no penalty will apply.

    Comparing these terms to those offered under HMRC's new tax penalty regime, a careless error which took prompting in order for the taxpayer to disclose it would normally result in a 15 to 30% penalty, based on the amount of tax due, but this will be reduced for cooperation factors, and could also be suspended. Penalties would be higher if an underpayment of tax was diliberately intended. So if a medic was knowingly not declaring income on something that he or she should have, the THP is a very good deal.

Gary Ashford, Chairman of the Chartered Institute of Taxation’s Management of Taxes committee, said: 

“HMRC have effectively structured their compliance risk and information gathering function into a national unit and we are now starting to see the results of their work.  

“The THP shows the way ahead for HMRC.  We have just seen the New Disclosure Opportunity end with 10,000 disclosures to HMRC.  Now it is the turn of health professionals; clearly other sectors may follow.” 

The CIOT does have concerns about the timescale of this new initiative: it is very tight.

What do you have to do to notify your intention to make a disclosure? 

It is advisable to read all the small print before making a disclosure in order to ensure that the disclosure is made fully and within the terms offered.

If a disclosure is not made at this time, tax penalties will be applied to errors in returns and documents according to the return period.