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Are you a doctor having trouble sleeping at night? Are you anxious about that tasty Bupa payment that you put in the wife's bank account that underwrote the week skiing with the kids in Verbier?
Are you concerned that that amiable Kuwaiti whose hip you replaced the other day can't really be trusted not to mention that he paid you in cash? Are you generally stressed?
If you are a doctor or surgeon who answers “Yes” to any of these questions, you should probably consult an accountancy professional. And you should do so immediately, because if you don't, HM Revenue and Customs may well be coming after you at the end of the month.
As the rest of us taxpayers reflect on Lord Ashcroft's enormous good fortune that, as a declared non-dom, he has not paid tax on his multi-million-pound global income, Her Majesty's Revenue and Customs is to spend the rest of the year going after the hard-working professionals foolish enough to stay living in London.
First under the spotlight is the medical profession but other sectors will be scrutinised later in the year, one by one, HMRC warns. As medium- and high-earners see their top income tax rate rise to 50 per cent from next month — higher than much of Europe, higher than every serious economy in Asia, higher than South Africa, for heaven's sake — the Government is treating the professional middle classes like a bunch of criminals.
HMRC has adopted a good cop/bad cop strategy and is circulating a rather patronising pamphlet, called a Tax Health Plan, for “medical professionals”. This allows doctors to confess, by 31 March, that they have — whoops! — failed to declare income and to repay what they owe (plus a 10 per cent penalty) by the end of June.
But it is not quite “pay up, no questions asked”, as this caveat in the pamphlet reveals: “HMRC cannot guarantee that a disclosure will not be subject to a criminal investigation.” So it is an amnesty with no guarantee of absolution.
And the bad cop role is further in evidence with a menacing warning that: “We have research and intelligence that tell us that there is a substantial risk associated with professionals either under-declaring or not declaring their income. We have particular information and intelligence related to medical professionals and it makes sense to start this campaign with them.”
Doctors are normally hailed as “front line” heroes by this Government, so it is oddly discordant to hear an agency of the state branding an entire profession as potential criminals.
Are doctors more likely to fiddle their taxes than, say, plumbers who claim not to know the new rate of VAT? What could this sinister sounding “intelligence” amount to? Is the Government spying on the nation's physicians — and if so, why?
“It does feel like a public effort to beat down on the profession,” says a north London consultant surgeon, who mixes his primary work at a teaching hospital with some private practice.
“The Government would like a more master-servant relationship with doctors, rather than the established notion that we are professionals, and equal partners.”
Part of it, says the surgeon, is that the Government knows it was completely outmanoeuvred by doctors and the British Medical Association in the rewriting of the GPs' contracts, which bafflingly paid them more to do much less and exempted GPs from out-of-hours cover.
“They got that contract negotiation disastrously wrong, and there is a feeling that this is payback time,” says the surgeon. He adds that all of his hospital colleagues have been investigated over the past two to three years, and, so far as he knows, none has been caught out.
Doctors and surgeons are a relatively easy target. Those who supplement their NHS income with private work are entitled to classify themselves as self-employed, which in turn means they file their tax returns on the basis of self-assessment. This opens up the temptation of “forgetting” about other sources of income.
“The whole notion of a tax inspector', as a civil servant who actually scrutinises an individual's accounts, has disintegrated,” says a leading London tax lawyer.
“Self-assessment is a system that requires the Revenue to do no work, other than exercise the threat of an audit. Going after the professions is just a straightforward effort to hit at the soft underbelly of lawful taxpayers, an effort by the Government to tell its client supporters that it has their interest at heart.”
The lawyer says the timing of the “crackdown” on the professions is not coincidental. “Raising the top rate of income tax to 50 per cent has led to people trying to protect their incomes. Pushing it up to 50 per cent is a psychological level at which they start taking steps. So it is likely that tax income from the middle classes will actually fall as a result of the increase.”
At the same time, the Government is struggling to plug the deficit created by the economic crash and the banks bail-out and needs revenue more than ever.
Doctors claim that the scope for fiddling their taxes is extremely narrow compared to other professions. They do earn extra money for filling in forms for insurance companies, or telling the DVLA whether a patient is fit to drive a car.
But as one doctor says, you would have to be “insane” not to declare income from a government agency or a major insurance company. For many years, doctors have earned a nice little £40 cash bonus — traditionally paid by the undertaker — for so-called “ash cash”.
Before a body is cremated, a doctor has to certify that there are no grounds for believing foul play.
Not only are they reminded to declare this payment nowadays but the vast majority of medics wouldn't dream of evading tax in the first place because unlike, say, electricians, or journalists, they are professionally bound to be truthful in all aspects of their life.
A doctor who fiddles his taxes is likely not just to be prosecuted, but also struck off the register.
Only a small proportion of doctors are in a position to shield substantial amounts of income from HMRC anyway. Most of them are leading surgeons based in London, doing a day or two a week in the clinics around Harley and Wimpole Streets.
These surgeons tend to demand to be paid upfront in cash, not necessarily because they are shielding the income, but because all these clinics have bitter experiences of trying to get patients from abroad to settle their bills.
Clearly there is a temptation for these well-paid surgeons not to declare all their earnings but as one private practitioner points out, largely because of demands of liability insurance, “only the most reckless of practitioners would be prepared to perform undeclared procedures”.
Naresh Shah, a partner at accountants Lubbock Fine, says his firm has had a number of emergency calls from its medical clients. Some were asking about the legal consequences of making a disclosure, to ensure they will not be victimised if they do so.
“We're not talking about huge sums,” he says, “it's about doctors who want to be able to sleep at night.”
What enrages doctors, as they find themselves the unwilling targets of the Revenue's vaunted crackdown, is the selectiveness of HMRC's laser vision. None other than the Chancellor himself was found to have “flipped” the designation of his second home four times in as many years, the better to avail himself of (tax-free) benefits at the public expense.
An HMRC spokesman declined to be drawn on whether our MPs might be classified as one of those deserving of closer scrutiny this year.
Tax professionals also point out that if doctors and surgeons did like Alistair Darling, who charged the accountancy fees for his deft financial manoeuvres to the taxpayer, they would be liable not just for a repayment demand but also for prosecution by the officials the Chancellor oversees.
Doctors, you have been warned.
Reader views (4)
These cowboys in HMRC are out of control, we need a strong government to stamp them back down and remind them that they are our servants, not our masters. Such a government cannot be a socialist one.
This is not to condone tax evasion, but our present socialist government has done all it can to confuse the general public about legal avoidance and illegal evasion.
The introduction of retrospective tax legislation will be a big dis-incentive to foreigners considering inward investment.
Stamp down on these parasites in HMRC and stamp down hard.
- Mrdavies, UK, 04/03/2010 21:01
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Im sorry but these doctors have to pay the tax due or they are breaking the law. In this case the only reason HMRC are targeting them is because they realise they have taking the ****.
- Jules_London, london, 04/03/2010 11:24
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At least the doctors won't be able to treat the Inland Revenue with the same contempt they treat their patients.
- Ann Louisa, Southampton, 03/03/2010 16:39
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Being one of the groups targetted by HMRC I have seen the lengths they are prepared to go in search of a few pennies. I say a few pennies because that is all they ever manage to get.
One example is IR35 which was introduced at the start of T. Blair's 1st term and was "sold" as being able to recover £700 million per year. Despite repeated questions in Parliament IR35's champions (Dawn Primerollo and Alistair Darling) failed to say how much tax has been collected. The freedom of information act recently reveiled that IR35 has raised less than £1.5 million per year; however no details are availble regarding the cost of implementing IR35.
HMRC's targetting of professional workers is doomed to abject failure, just like Section 660, IR35 and all of their other schemes. It is time that HMRC focused on the large targets such as multi-national corporations and the Banks. Oh sorry, I forgot that they won't do that because that is where the Chancellor and PM will look for jobs after being kicked out - remind me at which Bank T. Blair now "works".
- Dannyp, Egham, 03/03/2010 15:26
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