Article on the new Tax Health Plan

, We thought you would be interested in the following article from Paul Windsor, partner at specialist taxation firm WSM. The Tax Health Plan – what is behind this latest innocuous sounding ‘tax amnesty’ and where may it lead? Without rhyme or reason it seems, the powers that be at Her Majesty’s Revenue and Customs wake up one morning and announce a new tax amnesty. Why? Where does it come from? What is the legislative basis for sudden initiatives of this kind? Are there dark forces at work behind the scenes making the decision to peer under these particular hospital gowns? Amnesty is defined as a legislative or executive act by which a state restores those who may have been guilty of an offense against it to the positions of innocent people. Thus any amnesty of this kind assumes a level of guilt amongst the selected population. This strikes me as being a fairly confrontational starting point and naturally creates a defensive response amongst the professionals that are being put under the microscope. It all really started in earnest back in the good old days before the financial crisis with Lord Grabiner’s report on The Informal Economy in March 2000. In it he recommended that the treasury should approach the problem of the black economy on five separate fronts by providing incentives to join the legitimate economy, introducing preventative measures to limit new operations within the informal economy, the introduction of better methods of detection, the issuance of appropriate punishments for the guilty as well as giving them publicity in a naming and shaming scheme to deter other offenders. HMRC has been working on the more wayward sectors of the economy for many years; the building industry for example has been targeted almost continually since the 1980’s. Small ‘Hidden Economy Teams’ were formed in 2003 which were undertaking up to 30,000 Inland Revenue investigations a year yielding around £145m in additional revenues as a result of tax evasion. In 2008 two new trail teams were established at HMRC, the General Intervention team (60 officers) and a national Hidden Economy team (50 officers) under the General Tax Practitioners project. What seems to have evolved in the wake of this 2008 project is that the Revenue effectively structured their compliance risk profiling and information gathering functions into a single national unit. The culmination of all of this activity combined with adherence to the original guidelines outlined in Lord Grabiner’s report has led indirectly to the considerable success during 2009 of HMRC’s New Disclosure Opportunity – the euphemistically titled foreign bank account amnesty – which resulted in approximately 10,000 new disclosures last year. Emboldened with their success HMRC are now turning to middle class professionals and their first assault of the year is on the medical profession who for some reason seem to have attracted their unwanted attention. It is clear that the strategy of widely publicized tax amnesties is a more cost effective strategy than tackling individual cases – and those that have nothing to hide have nothing to worry about. So in the New Year we have the new Tax Health Plan – whoever dreams up these titles certainly has a dry sense of humor – which is open to all medical professionals almost as if its like joining the local golf club. The intention to disclose some previously undeclared income must be made by 31st March 2010 with actual disclosure of the sums involved and payment of any tax being made by 30th June 2010. Compliant doctors will benefit from a fixed penalty of 10% of the income disclosed, unless the disclosure is less than £1,000 in which case the penalty is waived. No one likes a cheat – least of all a cheat whose lifestyle has been principally been derived from the coffers of the hard-pressed tax payer through the NHS – however the assumption of guilt amongst the very many hard working, honest professional medico’s will cause considerable offence – even anger against the tactics of Her Majesty’s Revenue and may in the long run do more harm than good. More worryingly, these high profile campaign’s combined with the introduction of some of the highest rates of personal tax in Europe in a couple of months time, continue to build the impression that Britain is no longer a great place to live and work. Surely this cannot be good for the long term health of our economy. Paul Windsor Paul Windsor is a partner at specialist UK real estate tax advisor WSM Property (www.wsmproperty.com) Contacts: Paul Windsor, WSM Property 020 8545 7606 paul.windsor@wsm.co.uk www.wsmproperty.com Lauren Alexander, Maltin PR 020 7887 1357 lauren@maltinpr.com www.maltinpr.com Picture of Paul is available at www.maltinpr.com/paul-windsor Notes to Editors: Paul is a regular commentator on property and finance trends, including taxation. Paul J Windsor BSc FCA - Background Information Paul is 51, married with 3 children and lives in Haslemere, Surrey. Paul has been a partner at WSM Partners LLP since 1985. WSM is a firm based in London, SW19 with a team of 30 professionals. The firm has two divisions,one specialising in the tax for individuals and small businesses and WSM Property specialising in UK real estate tax. Having started his professional career with KPMG Paul now believes passionately that clients of all sizes are best served by smaller specialist firms and to prove the point the firm currently works for international clients such as Citigroup, UBS and Deutsche Bank. The firm is at the leading edge of UK property tax work and deals with complex limited partnership vehicles, SDLT restructuring cases and offshore property unit trust structures. In 2006 the firm was a finalist in the Accountancy Age small firm of the year award and has also been accredited with the Investor in People award for many years. Paul is also Chairman of Polka Children's Theatre Limited, a leading national theatre company dedicated to bringing the performing arts to children and young people. Polka's productions are always highly acclaimed and set a gold standard for children's theatre around the world.