Trick or Treat? HMRC offers chance to empty closet of undeclared skeletons

With Halloween only days away, our friends at HM Revenue & Customs have offered another group of errant “customers” another way of emptying their closets of undeclared skeletons.  This is the latest of a series of opportunities offered by HMRC to enable taxpayers to voluntarily settle historic tax issues, this time where undeclared income from a “health and wellbeing profession” is concerned.  This rather wide-ranging term includes:

  • physical therapies – e.g. physiotherapists, chiropractors, chiropodists, osteopaths or occupational therapists;
  • alternative medicines or therapies – e.g. homeopathy, acupuncture, nutritional therapy, reflexology or nutrition; and
  • other therapies – e.g. psychology, speech therapy, arts therapy and the like.

Anyone approaching HMRC by the end of the year will avoid the consequences of a formal enquiry when our friendly bogeyman, sorry – taxman, comes to call.  This campaign follows the recent one available to residential landlords who owe tax as a result of undeclared income from the letting of property and no doubt others will follow in due course.  What is puzzling is how HMRC decide who to check.  To start with, they have to make an assumption that people are underpaying tax as a result of either a misinterpretation of the rules (understandable), negligence (naughty), or deliberate underpayment (very naughty).  But are they right?  Health professionals seem an unlikely bunch of tax-avoiders, but no doubt HMRC have their reasons.

However, the numbers don’t always seem to add up.  For example, the campaign against residential landlords will, it is hoped, enable HMRC to collect £500m of tax from up to 1.5m landlords across the UK.  That sounds like a lot, but it only equates to £333 per head.  Half a billion pounds of revenue is clearly well worth chasing and HMRC should definitely try to collect it, but at the cost of 1.5m enquiry notices?  That seems like an awful  lot of work to me and past experience reveals that other targets have yielded wildly varying amounts.  The VAT Outstanding Returns Campaign, for example, yielded a rather paltry £70,000, but the Offshore Disclosure Facility a much more impressive £508,590,000.  When they get it right; they get it right.  When they get it wrong…

Things may go bump in the night, but beware the bump in the morning when an enquiry notice drops through the letterbox.  As always, forewarned is forearmed!

Carl Barwick – Tax Manager

Westbury Accountants and Business Advisors is an accountancy practice based in London. Westbury have been providing Accounting and Tax solutions to small and medium sized businesses since 1936.Talk to the team at Westbury on 0207 253 7272 or visit http://www.westbury.co.uk.