14 Comment


MEDICS, MONEY AND MORALS Why the integrity of the medical profession is crucial for the protection industry


I recently lunched with one of the big providers of impaired lives annuities. And, yes, it is a national scandal that so many about to be retired folk end up with the low level default option from pension providers. During our conversation, I


TONY LEVENE freelance personal finance journalist


WINNER of the Association of British Insurers Lifetime Achievement in Financial Journalism Award 2009


learnt how much of the sifting of the impaired from the very impaired is carried out by “doctors earning spare time money”. Now, if I worked for HMRC,


my evasion and avoidance antennae would be on full alert. For doctors are among


the trades and professions that I would target. Even if they are not as obvious as electricians, plumbers, and other tradespeople who can be sorely tempted by working for cash, I remain suspicious that they are vulnerable to the “that way it does not have to go through the books and so there’s no VAT” line. It is not surprising HMRC has drives


to increase tradesperson compliance including “amnesties” for those who confess past misdeeds. Campaigns with Orwellian titles such as “New Disclosure Opportunity” and “Offshore Disclosure Facility” have resulted in over 50,000 admitting guilt, paying £500m. But many will be surprised to see HMRC


targeting a group that keeps its hands physically much cleaner. The equally Orwellian “Tax Health Plan” was aimed at doctors and dentists in spring 2010. If they disclosed unpaid tax over the past 20 years voluntarily the penalty would be cut from 45% to 10% of the missing tax. The queue of doctors making


financial amends for fiscal wrongdoing was underwhelming. Just 1,500 owned up. There are some 300,000 doctors in the UK. The rosy-tint view is that the barrel is now free of the tiny number of tax bad apples. End of story. But that is not the opinion of tax


experts who say the grace period was too short while the need to come clean for 20 years was just too much – it is unreasonable to expect anyone to keep records for that long. And privately, HMRC was not happy


HealthInsurance


either. While it advertised the Tax Health Plan in the specialist medical press, it sent out more detailed letters to 28,000 medical practitioners. These were not chosen at random – they were doctors whose past filings and present actions had given rise to concern. Despite this effort, only around 1,500 confessed – just one in twenty of those on its “at risk” list. They paid £9m – an average £6,000 although one doctor offered £1m. No one believes the story stops here –


the amount the typical doctor disgorged compares with £10,000 from the typical tradesperson confession. There is now a strong likelihood that the exercise will be repeated in the autumn – in line with other amnesties – although, true to form, HMRC is saying nothing.


“Is the mind of the doctor fully on the task of examining the patient or wandering off to that Isle of Man bank account or Liechtenstein trust fund?”


What happens to doctors concerns


protection professionals. The whole industry depends on them and the trust both insurers and the public have in them. And much of the industry’s pricing structure is built around fees and other amounts charged by the medical profession. To put it at its crudest, is the mind of


the doctor fully on the task of examining the patient or wondering off to that Isle of Man bank account or Liechtenstein trust fund? Is the doctor concentrating on that medical practitioner’s report or worrying about whether the next knock on the consulting room door will be from the Revenue? Around one in ten doctors are on the


HMRC radar as tax cheats – there will be others but their tax failures are likely to be either so well hidden or, more likely, minor. But among the doctors that the insurance industry comes into contact with, the ratio will almost certainly be higher. Working with insurers gives rise to tax temptation. While nothing is paid


cash in hand these days, it is “easy to forget” those occasional payments of a few hundred pounds a time for a few medical reports or for a physical inspection or for the aforementioned spare time earnings when a doctor whose main work is for the NHS or a private health provider. Insurers and other employers are supposed to report all payments topping £250 – not much – in a year but some doctors bet that HMRC does not add them all up. In any case, there are expenses to deduct from gross earnings. Many doctors see these payments as


the bonuses they would have received had they become investment bankers. City folk have used all manner of dodges to keep their extra payments from the tax authorities – payment in wine, gold bars, options – and when these loopholes have been stopped, many have gone back to their bosses and asked for more so the net amount remained the same. So it may be that £1,000 bypassing


HMRC via a scheme will now have to be £2,000 to counter the 50% top rate tax. This will almost certainly push up insurance costs and hence insurance premiums, most especially in medical profession-heavy policies such as private medical and critical illness. Further down the line, HMRC has


plans to name and shame miscreants including doctors. It is not clear how this will work. Is it intended as additional punishment or as a stick to push tax dodgers towards the carrot of confession/restitution? But assuming it comes to pass, what


happens to client confidence if Doctor X is named as a tax cheat and Doctor X has just given an adverse report to a life cover buyer or has been involved as a specialist working for an insurer in a disputed critical illness claim? Could this be a form of as yet


unnoticed moral hazard? We have already seen the careers and


judgements of a number of pathologists publicly rubbished. Could the same happen with the doctors insurers use? It only takes a few tax cheats in the tabloids to wreck consumer trust.


HI www.hi-mag.com August 2011


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36