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Replies to Queries - Not so golden hello

05 May 2005
Issue: 4006 / Categories:

I have a general practitioner doctor client, who is in receipt of an inducement payment from the National Health Service. The NHS advises that this sum should be included in the practice accounts. However, it seems to me that this treatment will result in the payment being taxed in the year of receipt and then again in the second year of assessment, subject to overlap relief in a future year.
Do readers have any comments?
Is this treatment correct or is there any way in which the 'double whammy' effect can be mitigated?
Query T16,600 — Tarnished.

I have a general practitioner doctor client, who is in receipt of an inducement payment from the National Health Service. The NHS advises that this sum should be included in the practice accounts. However, it seems to me that this treatment will result in the payment being taxed in the year of receipt and then again in the second year of assessment, subject to overlap relief in a future year.
Do readers have any comments?
Is this treatment correct or is there any way in which the 'double whammy' effect can be mitigated?
Query T16,600 — Tarnished.


Reply by 'N.K.'

Looking at the www.nhs.uk website under inducement payments, this type of income is classed as falling under practice income. It should be noted that the main reference to this source falls under NHS Scotland, where such payments are designed to encourage the establishment of general medical practices in sparsely-populated areas.
The nature of the item under discussion is outlined under the Revenue's Business Income Manual at BIM54010.

'Medical practitioners receive, in addition to a capitation payment (or, in a few cases, a fixed annual payment), certain other allowances, all of which should be included in the computation of liability under Schedule D, Case II. These allowances include, among others ... an inducement payment, that is, an addition to the capitation payment, etc. in areas which are considered to be sparsely populated or otherwise unattractive to medical practitioners...'

Therefore the inclusion of the payment in the practice accounts is correct.
The simplest way out of this 'double whammy' would seem to be having the first accounts drawn up to 5 April (or 31 March), which would alleviate the need for overlap relief and then, if it is thought necessary in the future, to consider a change of accounting date.

Issue: 4006 / Categories:
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