Most practitioners will be aware of the Tax Health Plan. This was an initiative launched by HMRC in 2010 and was designed to encourage medical practitioners to make a disclosure to HMRC of previously undeclared income. Notification of the intention to make a disclosure was required by 31st March 2010 and the disclosure itself, together with the payment of all outstanding tax, interest and penalty was required by 30th June 2010.
The benefit of making a disclosure under the THP was that in all cases where the disclosure was accepted without challenge, a very lenient, even token 10% penalty was charged, whereas anyone failing to take advantage of the THP would be charged a minimum 30% penalty with the possibility of 100% in the most severe case(if anyone has come across such a penalty please do let me know),prosecution and a custodial sentence.
A client received a letter from HMRC just before Christmas (don’t the “nice” letters arrive from HMRC just before a holiday period!) which started off as follows:
“9 out of 10 people surveyed by Ipsos MORI in 2011 said that they trust their doctor to tell the truth. This makes doctors the most trusted profession in the UK. In keeping with this our records show that 97% of doctors have filed all their tax returns for the last 4 years. We know you have outstanding tax returns making you one of very few doctors whose tax affairs remain incomplete.”
The letter makes reference to the client’s failure to take advantage of the THP and continues:
“Your failure to contact us in the past may have been an oversight. However if you do not respond to this letter we will treat it as an active choice.”
Our client was somewhat offended by the wording and tone of this letter and wondered what had happened to the HMRC promise of fair and courteous treatment for all taxpayers ?The very thinly veiled accusation of dishonesty and the insinuation that my client was one of very few bad apples in the medical barrel was offensive to say the least (if HMRC really thinks that Doctors are the most honest professionals in the UK - they may well be - then why design a disclosure facility specifically aimed at them?).The final sentence quoted above also has a rather sinister tone to it and persons of a sensitive or nervous disposition could be intimidated or even frightened by it.
Perhaps it was the intention of the writer of this letter to intimidate or frighten my client into bringing his affairs up to date, or into making a disclosure of any hitherto undeclared income. Surely this is not the way forward in the future for tax investigations? Are we not sufficiently civilised in this country for the government and it’s departments to be able to enforce compliance without using such tactics? Why could the letter not have merely stated that the client’s returns were not up to date, and if action was not taken shortly to bring them up to date, then HMRC would have no alternative but to make a determination which may result in excessive amounts of tax to be paid? This gets the message across without sarcasm, without innuendo, without sinister phraseology, but uses old fashioned courtesy to someone who may have very good reasons, unconnected with evading tax, for being in arrears with their tax returns. Perhaps the taxpayer had had a breakdown a few years ago and could not cope with the preparation of tax returns – a letter of the type received would do no end of harm to such an individual.
This approach reminds me of something which Mr Hartnett, the HMRC's Permanent Secretary was quoted as having said a couple of years ago. He certainly referred to the fact that the “middle classes” would be crying because they would not believe how tough HMRC would become in policing their tax affairs.
Having done the job myself for 14 years before moving across to accountancy, I can fully appreciate how some investigators can feel about deliberate defaulters. The job can be stressful, frustrating, and the rewards could be better. That said, up to a couple of years ago I had never come across a tax investigator who was anything other than courteous and professional and I cannot understand why some officers are now being allowed to adopt the more aggressive and intimidatory approach mentioned above. Targets can be achieved by using a firm, persistent but polite approach without trying to scare people and I would be interested to hear from anyone who has encountered similar approaches to the above.
We have a highly experienced team of consultants who specialise in defending clients (and in some cases accountants!) from attack by HMRC. Our team includes 4 VAT specialists and also a former group leader of the HMRC serious fraud department who advises on the preparation of Hansard reports and has particular skills in negotiating penalties.
We are always interested in hearing of examples of HMRC behaviour (good or bad) and if site visitors would care to share their experiences with us we will include them wherever possible in this blog.