Case Study: Tax investigations in the Healthcare Sector

There is nothing particularly unusual about these enquiries and therein lies the problem – even a straightforward enquiry is likely to cost the equivalent of 10 years subscription to our tax investigations service.

Should have gone to…

HMRC opened a review into the VAT records of an optician. After visiting the premises and finding inconsistencies in the VAT calculations, HMRC requested further information including statutory accounts and copies of purchase invoices.
Opticians are required to pay VAT on particular products,
such as glasses frames and physical goods. Services however, including sight testing, measuring and fitting are exempt supplies. This means an optician is required to maintain a partial exemption calculation to reflect the different types of supply. The VAT officer soon found discrepancies with the apportion calculation used to determine payable VAT.
At that visit, the VAT officer queried the client’s time allocated to dispensing and found the figure had been reduced in error by 10% - resulting in additional VAT due.
After several months of waiting for a response, the VAT
officer finally settled and confirmed a new VAT percentage.
A thorough defence reduced the VAT settlement by 50% and the £3,000 defence fees were covered by the Tax Investigations package.

Enquiry at a glance:

• Professional Fees - £3,000

A tough extraction

HMRC opened a full enquiry into a Dental Associate raising
a number of questions in respect of the figures declared on the return and also requested submission of all business records relating to the self-employment activity. The Inspector reviewed the information and documentation provided.

This gave rise to a number of concerns in respect of travelling expenses claimed as well as the declared income of the business.
It transpired that the Dentist had received ancillary income that had not been included on his return as it had been deposited into a separate bank account which was not considered when the business accounts were prepared.

The additional income and reduction in allowable expenses were finally quantified and the enquiry was concluded. Whilst the Dentist unfortunately had to pay an additional settlement, the representation fees of £3,443 were covered under the Tax Investigation package.

Enquiry at a glance:

• The enquiry lasted for 15 months
• A settlement of circa £25,000 was paid to include the tax, interest and penalties
• Accountancy fees of £3,443 were covered under the