The taxman cometh, and in his right hand he swings an axe coated with the blood of doctors and dentists. He is done with them, and now he seeks to scythe down all solicitors and barristers who have avoided paying him his dues…The taxman had already shifted his gaze to the UK’s highest earning professionals, what with his new 50% tax rate on high earners. Now he is looking to bring in money from tax avoiders within the same demographic. HM Revenue and Customs has asked doctors and dentists who have avoided tax in the past – knowingly or unknowingly – to repay what they owe plus 10%. Failure to pay up before 31 March means a fine of up to 100% of the undeclared tax, being named and shamed on the HMRC website, and maybe even a prison sentence of up to seven years.
To back up its threats, HMRC said that it will carry out ‘targeted investigations’ against those who do not come forward before the deadline. The Revenue claims that it has already started comparing earnings information from NHS trusts and earnings information on individual doctors’ tax returns.
The rationale for the initial raid on medics is that they undertake a lot of contract work, something that is alien to most solicitors working in anything bigger than the smallest firms. So it is unclear what HMRC will do when, as expected, it extends it investigations to the legal profession. Will the taxman be examining protective tax schemes set up by some partners in big City law firms? Or will it be profitable sole practitioners that bear the brunt of the inquiry? Similarly, barristers, self-employed as they are, might be easier to target. But HMRC won’t have the luxury of matching up individual tax returns with publicly held pay data.
All of this begs the question as to whether HMRC has been quiet about how they’ll investigate the legal profession because they haven’t quite figured out where avoidance exists, and if it does, how to unearth it on a grand scale. Alternatively, the hints of a broader inquiry that have come attached to the raid on medics might just be scare tactics designed to stir some lawyers into tightening up their tax returns.