A typical example might arise for a medical consultant.  Early in his career another organisation might have deducted basic rate tax before making payment to him.  The consultant has now become a higher rate taxpayer but the minor sources of income should have been declared in full so that the additional higher rate tax could be paid.  As a result too little tax has been paid each year.

Another illustrative example might arise where general practitioners claim a generous estimate of business mileage in respect of motoring but fail to keep a mileage log or records to support their claim with the percentage business mileage having become excessive since the reduction in ‘out of office’ calls and home visits of recent years.  The failure to keep records is a failure to take reasonable care and under the new penalty regime such a mistake could make the doctor liable to a penalty of up to 30% for the mistake in over-claiming expenses.

It is known that HMRC has already obtained details from BUPA, Sun Life, and other healthcare providers and payers about doctors who have not declared some or all of their income.  These include private consultancy fees, ash cash for signing cremation certificates, reports, passport fees and other items of sundry income.

More detail about the ‘tax health plan’ can be obtained by clicking on the following link http://www.hmrc.gov.uk/tax-health-plan/index.htm.  In broad outline, the tax health plan will operate from 11 January 2010 to 31 March 2010 giving doctors the opportunity to notify HMRC of their intention to take advantage of the plan.  The doctor then has until 30 June to make a disclosure and pay the tax, plus the interest due, plus the certainty of a fixed penalty of 10% in all but the most heinous cases. 

There can be little doubt that HMRC has the authority to vary penalties.  This was established in the National Federation of Small Business case which confirmed in its decision that HMRC had the authority to vary penalties at HMRC’s discretion.  But this leaves open the question as to whether it is right that HMRC should offer this facility to, for example, medical practitioners but deny an identical facility to, for example, fish and chip shops which are known to be the subject of a campaign to encourage full compliance.

The tight deadlines are an opportunity for those in the medical profession, who have in the past made errors, to become compliant and bring their tax affairs up to date.

If you are at all concerned about the figures for income or expenses shown on your Tax Returns, or wish to know more about our optional Tax Enquiry Insurance Scheme then please speak with your usual contact at MACo, or Richard Green in our Tax Department.