HMRC is currently sending out letters to people conducting consultancy work in the medical sector in an effort to close part of the tax gap.
Receiving a letter does not necessarily mean that you have done anything wrong, but knowing how to respond could be vital for staying compliant.
Other sectors may soon face similar scrutiny, so it is beneficial to understand the latest intervention and to ensure you are fully compliant with your tax returns.
Are consultants in the medical sector failing to pay the right amount of tax?
Consultants are expected to accurately report the amount of income they receive when submitting a Self Assessment tax return.
However, HMRC is aware that some consultants, particularly in the medical sector, might be downplaying the amount of income received in the hopes of paying less tax.
There is also a possibility that some may be inaccurately tracking the income they receive, resulting in errors that are nonetheless problematic.
The issue has been detected after HMRC obtained information from healthcare providers and discovered a number of individuals whose reported income did not match the consultancy fees they received.
Due to it being unclear the extent to which the problem is error and the extent to which it is fraud, HMRC is not yet treating the matter as a formal compliance check.
Instead, letters are being sent to those who may be affected to remind them to review their Self Assessment tax returns and verify that all consultancy income has been declared.
What should consultants do if they receive a letter from HMRC?
Tax advisers and accountants are not going to receive copies of the letters, so those who do should ensure that they pass along a copy to their trusted professional.
Our expert team can support you in understanding what you need to do next to remain compliant.
All recipients of the letters will need to take action, even if everything has been fully accounted for in a Self Assessment tax return.
At the very least, recipients will need to respond to HMRC and confirm that there is nothing left to disclose.
Where omissions have been made, the letters provide an opportunity to set the matter straight.
Tax returns can be amended within 12 months of the statutory filing deadline, which is 31 January following the relevant tax year for Self Assessment tax returns.
If the deadline has passed, HMRC expects a disclosure to be made.
Doing this may mitigate the penalties that a consultant could receive, as it demonstrates a willingness to admit to a mistake.
Ignoring the letter will likely be seen as a means of being dishonest and could see those affected become subject to a full compliance check.
There is a 30-day deadline in which to respond to the letter, meaning that seeking expert advice should be done as soon as possible.
Other consultants outside the medical sector should also take note to ensure that they are accurately recording and reporting their income, as it can be expected that similar measures will be taken in other sectors.
For full expert support with managing Self Assessment tax returns and HMRC compliance letters, get in touch with our team.