By Robin Stride
Hundreds of independent practitioners will be forced to make hefty shock payments to HM Revenue and Customs (HMRC) after coming unstuck while trying to limit their tax bills.
Many now face having to hand over six-figure tax sums they thought they had escaped by entering tax avoidance schemes.
Courts will ultimately decide the legality of these vehicles, but meanwhile tax inspectors are using new powers to demand millions of pounds worth of taxes from high earners who have put money into them.
The Accelerated Tax Payments (ATPs) measures are affecting private consultants and GPs, NHS GPs, and dentists.
Tax expert Vanessa Sanders (left) said: ‘Frighteningly now, under initial measures introduced in July 2014, HMRC is able to issue ATP notices to tax scheme users demanding the tax to be paid in advance of any court decisions.’
Accountants say a high-earning doctor who ‘typically’ put £200,000 offshore could expect to pay HMRC £140,000 in income tax and national insurance plus 100% penalties and then interest.
Mrs Sanders, who works for Stanbridge Associates, told Independent Practitioner Today: ‘For someone having to pay up, then a bill of £280,000 is not uncommon. Then there could be court costs to defend an action which could be £25,000-£100,000. A total pay-out could be two-and-a-half times the initial investment.’
Other doctors will have to pay much more. Some have put all their profits, totalling £500,000 in one year, into tax avoidance schemes.
Mrs Sanders said: ‘This will be a massive shock to many doctors. Some are in disbelief at the amount they might have to pay.
‘But, in my many years of experience, if you live in the UK, you have to pay tax in the UK and accept that and be efficient. No amount of tax planning makes it magically disappear.
‘We have warned against these schemes, but clearly some doctors have gone ahead and done it anyway’.
From considering the latest rounds of tax returns, she estimates around 3.5% of hospital consultants have been persuaded to enter into avoidance unwittingly, believing it to be legal and moral. Evidence of tax avoidance includes some offshore trusts and personal management companies.
She is worried that some promoters of avoidance may tell doctors they have counsel’s opinion that these ideas are not schemes but efficiencies and are perfectly in accordance with the legislation.
Former tax inspector Mrs Sanders said: ‘What if the promoter’s barrister is wrong? As we are aware, there are always two sides represented by counsel in court and only one tends to win. The case is not decided until tested.
‘Some firms may even use the famous 1929 quote from Privy Counsellor Lord Clyde, serving time as Lord Advocate and Lord General Justice, which is often used in the tax tribunals.
‘He said: “No man in this country is under the smallest obligation, moral or other, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.
‘‘The Inland Revenue is not slow – and quite rightly – to take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue’’.’
She advised doctors with one of these schemes to contact their promoter for reassurance and keep in regular contact.