Tax muddle leaves GPs with £20k bill
GPs hit by a £20,000 Inland Revenue bill following the refurbishment of their practice have criticised tax laws, claiming they are a disincentive for GPs to improve their premises.
The four GPs spent more than £400,000 on extending their Dorset practice after buying an adjacent bungalow six years ago.
New features included automatic sliding doors, noticeboards, bicycle holders, ash panelling, an aquarium and new doors throughout. But the Inland Revenue denied the practice's claim for 40 per cent capital allowance tax relief on the items because they are not 'plant and machinery'.
The Capital Allowances Act 2001 specifies that only plant and machinery qualifies for the 40 per cent relief given in the year the investment is made.
Lower percentage relief is available in subsequent years until 100 per cent relief is reached.
Accountants NBW Crosher & James, who were drafted in to agree a revised claim with the Inland Revenue, said there was confusion over what could be counted as 'plant'.
A spokeswoman said: 'In some cases ambient features within the surgery may be considered as plant but the question arises as to their true purpose and how this facilitates the activities of the trade.'
Hotels are allowed capital allowance on features creating ambience but GP surgeries are not.
Dr Graham Archard, the senior partner at the practice in Christchurch, said the practice was being unfairly penalised for following the Government's agenda to improve GP premises.
'The partnership invested significant amounts of capital to improve the ambience and comfort for our patients in line with Government recommendations,' he said.
'It seems people should be comfortable in hotels, but not apparently in GP surgeries.'
GP accountants said the law surrounding capital allowances was a 'nightmare' and the practice had been unlucky to be caught out.
'It all depends on the individual taxman,' said Roger Street of Roger Street Associates. 'Some will really get
their teeth into something and others will say "we're talking peanuts and will move on
to another case somewhere else".'
Tips on capital allowance claims
1Make sure you know what you are claiming for Under self-assessment rules it's the taxpayer's responsibility to ensure their return is correct. Inaccuracies could lead to penalties and a wider investigation.
2Start creating a clear audit trail as soon as the project begins This will allow you to answer subsequent tax inspector queries quickly. Gaining the confidence of the inspector by answering any query within days rather than weeks can make a big difference to the potential outcome.
3Start preparing the capital allowance claim as soon as possible Don't leave it until the building work is almost finished. It will allow you to build a picture of where costs have occurred rather than simply giving a headline figure at the end.
4Break down costs as they are incurred and the claim itself as much as possible. For example, automatic doors are not normally eligible for tax allowance but their motors often are. Get your accountant involved in the process early on.
5When negotiating with the tax inspector, don't give up too easily Equally, don't antagonise the inspector by including items for which there is no basis for a claim.