Hospital doctors - Self-assessment

Tax Return Filing Dates

• For partnership and personal tax returns, the last filing date is 31 January after the tax year end (e.g. 31 January 2011 for the 2009/10 tax year).
• There is an automatic late filing penalty of £100 per personal return and £100 per partner for a partnership return.
• If the tax return is submitted more than 6 months after the last filing date, there is a further automatic late filing penalty of £100 per individual or per partner.
• If the tax return is submitted more than 12 months after the last filing date, there is a tax-based penalty.
• HMRC has the power in certain circumstances to charge £60 per day for every day that the tax return is late.
• The late filing penalty may be extinguished if the doctor or partnership has a reasonable excuse for not submitting the tax return on time. A reasonable excuse would be an event outside the individual or partnership’s control, e.g. death or serious illness.

Record-Keeping & Penalties

• Financial penalties were introduced with self-assessment for failure to keep records (1996/97 onwards).
• Records must be kept
• For employees, records must be kept for 22 months after the tax year-end
  (i.e. 31 January 2012 for the 2009/10 tax year).
• Individuals with property income, self-employed or private earnings, records must be kept for 5 years from the 31 January after the tax year
  (i.e. 31 January 2016 for the 2009/10 tax year).
• Records include:
• accounts, books, contracts, receipts & vouchers.
• interest statements & dividend vouchers.
• PAYE records i.e. P60, P45
• The Inland Revenue has the power to call for underlying records to support all figures included in the tax return.
• The penalty for failure to keep records is up to £3000.

Tax Payment

• Self-assessment introduced payments on account payable 31 January in the tax year and 31 July after the tax year end. These are based on the previous year’s tax liability and amount to 50% of this liability on each instalment (excludes tax deducted at source).
• Any balance of tax due for a tax year is payable by 31 January after the end of the tax year, together with the current tax year’s first payment on account.
• No payments on account are necessary if
• The total payments on account are less than £500 or
• The individual had 80% or more of their previous year’s tax liability deducted at source (i.e. PAYE system, taxed interest etc).

HMRC Enquiries

• Prior to self-assessment the Inspector of Taxes only commenced an investigation if he was dissatisfied with submitted tax returns or accounts or held details of undeclared income.
• Under self-assessment an enquiry (old investigation) can be opened by random selection or for any reason. The enquiry will be opened and closed by a formal written notice. The time limit for opening an enquiry is normally 12 months following submission of the tax return. However, the Inspector still has powers to enquire into a taxpayer’s affairs after the 12 month period if he believes there is evidence of non-disclosure or fraud etc.

Employed hospital doctors - Tax – Expenses

Expenses
There is little scope for an employed doctor to claim tax relief on expenses. For an expense to be tax deductible it must be expended ‘wholly, exclusively and necessarily’ in the performance of the duties of employment.

• The cost associated with replacing small items of medical equipment (e.g. stethoscope) should be tax deductible, provided the employer does not provide the equipment.
• Tax relief is specifically allowed on the annual subscription or retention fee (not registration fee) to approved professional bodies (e.g. BMA,GMC etc).
• Tax relief is allowed on professional indemnity insurance (e.g. MPS, MDU etc).
• Tax relief is not available on examination fees or course fees. There is an exception where the course is a full-time one requiring the employee’s attendance on every (or virtually every) working day for four consecutive weeks or more. The course also needs to satisfy additional stringent conditions laid down in the extra-statutory concession.
• The cost of books is not usually tax deductible. In exceptional circumstances where a doctor is required to purchase substantial works of reference, the Inland Revenue may allow a deduction under the capital allowances provisions.
• Protective clothing and the cost of its cleaning may be allowable if the employer does not meet the costs.
• The purchase and cleaning of everyday clothing is not tax deductible.
• Non-reimbursed business mileage is tax deductible. Employees can make a claim based on the actual costs incurred (receipts must be kept) or by using the Authorised Mileage Rates which are set by HMRC. (Home to work travel does not count as business mileage).

Expenses Reimbursed

• In most circumstances, business expenses such as mileage allowances and course fees reimbursed by an employer are not taxable on the doctor.
• Reimbursed telephone rental costs are usually taxable on the doctor as the rental charge is incurred for both professional and personal purposes. Any taxable element will be reported on form P11D by the employer.
• The tax treatment of reimbursed mileage is complex and can differ depending how the reimbursement is calculated. Generally, business travel costs reimbursed are received tax free by the doctor. In certain circumstances, additional tax relief may be claimed by the doctor on business mileage costs where the amount reimbursed by their employer is less than the costs incurred. Business mileage that is reimbursed in excess of the costs incurred (therefore containing a profit element) will be taxable on the doctor and shown on form P11D provided by the employer.
• Qualifying removal expenses associated with a doctor’s relocation may be paid tax free up to a qualifying limit of £8,000. The area of relocation expenses is extremely complex and professional advice should be taken if the situation arises.

Income Tax Returns

• Employed doctors with salaried income only will not normally need to complete an income tax return unless:
• The doctor has been sent one by HMRC.
• The doctor wishes to claim tax-allowable expenses e.g. subscriptions, mileage etc.
• The doctor has received untaxed fees (e.g. cremation fees, court reports, rental income etc)
• The doctor is a higher rate taxpayer with other income (e.g. dividends, bank interest etc) on which additional tax will be due.
• Regardless of whether or not a tax return is received, there is a legal obligation on all individuals to notify HMRC of any liability to tax they have by 5 October following the tax year end (i.e. 5 October 2010 for 2009/10). Failure to notify HMRC could result in tax-based penalties.

This information sheet is designed to be a general guide only and no liability is accepted by Taxation Solutions Limited for any loss occasioned in reliance on the information given therein.