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February 4, 2010

HM Revenue & Customs (HMRC) has taken the unprecedented step of targeting medical professionals with another disclosure effort. This initiative follows the recent New Disclosure Opportunity (NDO), which was aimed at tax evasion relating to offshore bank accounts.

Under the so-called Tax Health Plan (THP), doctors, dentists, hospital consultants and cosmetic surgeons have until 31 March, 2010 to notify HMRC of their intention to make a disclosure of all irregularities in their tax affairs, not just those associated with income as medical professionals. They will then have to quantify that disclosure and pay the tax due, plus interest and a penalty of 10 per cent (unless the tax due is less than £1,000) by 30 June, 2010. Failure to notify HMRC of an intention to use the THP by the due date will mean that disclosure under the THP will not be possible and the offer of a reduced 10 per cent penalty will be withdrawn.

HMRC has made it clear that it has already used its resources to obtain information about payments to health professionals by NHS trusts, private hospitals and medical insurance companies. This information will be checked against tax returns submitted by medical professionals and disclosures made under the THP. When a disclosure appears to be materially incorrect, HMRC will investigate, quite possibly using its criminal powers.

It is important to note that when a disclosure of unpaid tax is linked to an offshore account or asset that could have been disclosed under the amnesties in 2007 and 2009, the favourable 10 per cent penalty under the THP will not be available. However, anyone affected in this way should seek urgent advice as to whether or not they are eligible to take advantage of the Liechtenstein Disclosure Facility, which runs until 31 March, 2015. Likewise, those who opt to be investigated under the Civil Investigation of Fraud procedure and, thereby, procure a guarantee that their offences will not be criminally investigated, will not qualify for the 10 per cent penalty loading.

HMRC has said that the following disclosures are unlikely to be accepted under the THP:

  • Disclosures that are found to be materially incorrect or incomplete. The most serious of such cases could be subject to criminal investigation.
  • When an investigation is already underway; however, it might still be possible in these instances to negotiate a lesser penalty.
  • Cases involving serious organised crime, such as VAT MTIC fraud or any wider criminality, especially when a police investigation is already in progress.

Anyone who makes a complete disclosure under the THP is almost certainly guaranteed to avoid a criminal investigation. On the other hand, HMRC has also indicated that after the 30 June, 2010 deadline, it will ‘follow up with assertive action’ against those who choose to ignore this opportunity to make a clean break of all irregularities in their tax affairs. This will certainly involve a rigorous and costly investigation and, at the very least, penalties of between 40 to 50 per cent. In some cases, this could result in a criminal investigation.

Strangely, HMRC has said that anyone other than a medical professional who comes forward voluntarily before 31 March, 2010 to make a disclosure of tax irregularities will be subject to investigation under its standard procedures and will not be guaranteed the 10 per cent penalty loading available under the THP. This seems to be contrary to natural justice and must be strongly resisted.

Finally, it is clear that the THP is merely HMRC’s first step in a major offensive against general tax evasion. Other trades and professions must expect similar attention in the years to come, such as lawyers, vets and IT consultants.

For confidential, round-the-clock advice, please contact Rebecca Busfield. Rebecca can also be reached at: +44 (0)75 1500 2002.

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