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Tax amnesty: how GPs should deal with undeclared income

A few weeks ago, I was in the florist in Cockfosters (really excellent florist) when I was tapped on the shoulder by an old friend, a doctor who now works for a drug company.

He wanted to tell me that his company had received a letter from HMRC and asked to provide details of payments to doctors in the last few years, and of course they obliged.

This is the beginning of a sweep up by HMRC following the Tax Health Plan (see www.hmrc.gov.uk/tax-health-plan for more details). In principle, doctors had a time limited opportunity to come clean and declare under an amnesty any undeclared earnings over the last 20 years, and the message was 'woe betide you' if you have such undeclared income and don’t take advantage of this generous HMRC offer.

In fact, very few clients took advantage of this - most were put off by having to sign a statement with the undeclared income that there was no other undeclared income in the last 20 years.

Timing is everything, and around the same time HMRC issued a new Penalty regime (see www.hmrc.gov.uk/about/new-penalties/faqs.htm for more information).

If a taxpayer fails to notify HMRC about a source of income that should be taxed, the penalty for 'deliberate with concealment' is 100% of the tax. Ouch!

So what should a doctor do reading this and worrying about some undeclared income – well, the penalties can be mitigated, the most important step is for the doctor to tell HMRC before HMRC write to them. Co-operation helps a lot is assessing penalties.

How far back will HMRC go? Ask your accountant and the standard answer is six years. However, I was once involved in a nasty enquiry, and the Tax Inspector revealed that HMRC take the view that an individual’s culpability to negligence is linked to their intellect.

In this case, they argued, the doctor is clearly intelligent, must have know he was under-declaring his income and so must be negligent.

Negligence, you see, allows HMRC to go back 20 years. I pointed out to the Inspector that he is an intelligent man, and accordingly he must know what is going on with the NHS. What could he tell me about the latest developments with GP Commissioning? He dropped the 20 year issue!

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