Share this content
0
5620

Medical consultant using limited company

Medical consultant using limited company

Didn't find your answer?

Search AccountingWEB

I have an accountant client who has a medical consultant as a client. HMRC have written to the accountant saying that the company cannot operate the doctor's profession, that there is no commercial or business motivation for incorporation as incorporation does not protect the doctor from risk - he remains personally liable -and thus they propose to tax the doctor on the profits of the business personally - ignoring the existence of the company for tax purposes.

We all understand the arguments that a medical consultant does not have transferable goodwill on incorporation but this is not the issue here. Essentially, HMRC just propose to ignore the existence of the company even if contracts are between the company and the patient/hospital etc. There are a fair number of incorporated individual locum doctors and medical consultants and I was wondering if anyone else has seen a similar letter? The Inspector does say HMRC are going to ensure that other doctors are treated the same way, that they are looking for a test case and that they will be publicising their views on this soon.

My email address is below if anyone would prefer to email me rather than post details here.

Thanks

Cathy

[email protected]

Replies

Please login or register to join the discussion.

avatar
By newmoon
02nd Dec 2013 13:03

What about an unlimited company then?

I've never dealt with an unlimited company, but looking here http://www.hmrc.gov.uk/manuals/pommanual/paye20180.htm HMRC says they are dealt with in just the same manner as a limited company (I appreciate it's in a PAYE manual that it's saying this).

So it doesn't seem valid to say that if liability isn't limited then it's not subject to Corporation Tax.

 

Thanks (0)
avatar
02nd Dec 2013 13:30

@newmoon

I agree, Newmoon. My view is that HMRC would need special legislation to ignore the company if the legalities (contracts etc) are correctly drawn up. But, to be honest, there are other arguments raised in the letter that are easily refutable. If this Inspector is going to take the test case, he will need to sharpen up a bit! 

I was mainly curious to see if others are getting the same letter - and a bit shocked that HMRC wanted to do something as drastic as ignoring the legal reality without even having made their views public!

 

Thanks (0)
avatar
By neileg
02nd Dec 2013 13:42

Mmm...

Not sure where HMRC’s logic is coming from but that doesn’t mean they’re wrong.

It’s perfectly legal for a company to offer medical services and for them to employ people to deliver those services, so there’s no blanket ban on using a PSC.

However, if the contract for services is between a healthcare provider and the doctor personally, then you can’t just slip a company into the loop. So who will be the contracting parties?

There are a number of situations where the courts will lift the veil of incorporation and find that individuals have personal liability for something the company has contracted for. Health and safety breaches is one area that springs to mind. The fact that the doctor retains personal responsibility for his actions as employee of the company does not make the existence of the company something that HMRC can simply ignore. 

Thanks (0)
avatar
02nd Dec 2013 13:43

@cathy

I would do a one liner back 'Please let me have a statutory reference for HMRC's view'

Thanks (0)
avatar
02nd Dec 2013 13:44

btw

I have just incorporated a consultant for a separate business of medico - legal work

Thanks (0)
to Tornado
02nd Dec 2013 14:50

IR35?

IR35 effectively ignores the legal structure.

Are HMRC simply saying that this is a quasi-employment between the doctor and the recipient of the services and so IR35 applies?

Thanks (0)
avatar
02nd Dec 2013 15:00

@ Red Leader

There is no suggestion that this is quasi-employment. HMRC want to tax the doctor as self-employed.

As you say, IR35 'effectively' ignores the legal structure - but the point is that there had to be special legislation to enable this 'looking through'. If HMRC could have just ignored the legal structure because an individual had no personal risk etc, they wouldn't have needed specal legislation. And I think that's what is needed here if the legal reality is to be replaced by a fiction for tax purposes.

Cathy

 

[email protected]

Thanks (0)
avatar
14th Jul 2014 10:54

Any updates

Cathy - have you come to any conclusions on this one?  I would be very interested to hear.

Thanks

Thanks (0)
avatar
By Munsh
20th Oct 2014 14:42

How did it go

Hi Cathy any conclusions ?

 

Thanks 

Munsh

Thanks (0)
avatar
24th Mar 2017 14:25

We had a similar problem over 2 years. In the End HMRC accepted that where a valid contract with the company existed (Backed up by a letter from the locum agencies directors) that they would accept this as company rather than the Doctor's income. This was the majority of the income but we couldn't get similar letters of comfort from the insurance company work and so we compromised that this element would be re-assessed as the Doctors. The lesson is to place a letter on file from outset to the contracting party that they should be aware that they are contracting with the company for the Doctor's services. This is some 4 years after this initial post and there is still no test case!

Thanks (0)
avatar
24th Mar 2017 14:25

We had a similar problem over 2 years. In the End HMRC accepted that where a valid contract with the company existed (Backed up by a letter from the locum agencies directors) that they would accept this as company rather than the Doctor's income. This was the majority of the income but we couldn't get similar letters of comfort from the insurance company work and so we compromised that this element would be re-assessed as the Doctors. The lesson is to place a letter on file from outset to the contracting party that they should be aware that they are contracting with the company for the Doctor's services. This is some 4 years after this initial post and there is still no test case!

Thanks (0)
avatar
24th Mar 2017 14:25

We had a similar problem over 2 years. In the End HMRC accepted that where a valid contract with the company existed (Backed up by a letter from the locum agencies directors) that they would accept this as company rather than the Doctor's income. This was the majority of the income but we couldn't get similar letters of comfort from the insurance company work and so we compromised that this element would be re-assessed as the Doctors. The lesson is to place a letter on file from outset to the contracting party that they should be aware that they are contracting with the company for the Doctor's services. This is some 4 years after this initial post and there is still no test case!

Thanks (0)
Share this content