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Newth Talks Tax - Tax writer of the year John Newth solves your tax questions

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29th May 2007
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Doctors and brown envelopes

Alastair Taylor’s client was a market research company, which conducted interviews on behalf of large pharmaceutical companies. The interviewees were senior doctors and consultants, who were paid for their co-operation by several hundred pounds in cash placed in a brown envelope for each interview. The client company told Alastair that this procedure was common practice, and HMRC were not interested because the amounts were being paid to doctors!

Have other subscribers encountered this situation in practice? And can anyone vouch for the fact that HMRC are not interested in pursuing doctors who receive undeclared income?

Of course, HMRC are interested in pursuing anyone who commits tax defaults, as Steve O’Neill rightly pointed out. This includes ministers of religion, Members of Parliament, judges and policeman, as well as Commissioners of Income Tax and senior figures in the Armed Forces. Indeed the more well-known the person is then the more likely they are to face prosecution in a serious case of tax fraud. As Jim Sayer pointed out this even extends to solicitors, who charge ‘tea money’ of £25 for witnessing documents. Fortunately accountants rarely deal in cash.

As Steve points out, every few years HMRC mount an investigation campaign into funeral directors. Their target is not the funeral director himself, but others who receive cash for each funeral, such as contract pallbearers, gravediggers, organists - and doctors. Doctors receive what is known as ‘Ash Cash’ for signing a death certificate. One can speculate as to just how many payments of this sort are paid out by a funeral director in any one year.

Cash payments from pharmaceutical companies are another source of cash income for doctors, and GPs will often charge a small fee for private medical insurance certificates. Dealing with the accounts of medical consultants and medical GPs is a specialised task, and there are a number of accountancy firms who specialise specifically in this area. I am sure that they are well aware of the situation outlined, and seek to ensure that their clients comply with tax law and practice.

David James extended the scope of the query to include the question of money laundering. Alastair would need to have made a note that the money laundering angle had been considered after talking to his market research client. He would have to decide whether his fears about the market research company were merely speculation or firm suspicion. In the latter case, action would have to be taken (perhaps after taking advice). In theory this is a very serious situation.

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By dsassoon
29th May 2007 13:49

Market Research and Brown Envelopes
It is not uncommon for a market research company to pay an honorarium as a cash payment, in a brown envelope.

I even know of someone who received one for undertaking a market research interview / focus group for, of all people ... THE INLAND REVENUE (HMRC) !!!

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