Tighten up bookkeeping for VAT
Practices will have to adopt a far more rigorous financial regimen when they register for VAT in order to avoid potentially severe penalties.
Medical accountants are warning that the VAT inspection regime is far more stringent than for income tax and that many practices' bookkeeping is not up to scratch.
The advice comes as the BMA battles to convince HM Revenue and Customs not to introduce the requirement for most practices to register for VAT this April.
The BMA has called for the change, which was brought about by a European Court judgment that VAT must be charged on certain 'non-medical' services, until April 2007.
Medical accountants said practices should start preparing now for the new rules, in case the Government ignored GPs' appeals to be given more time to prepare.
VAT registration would compel practices earning more than £60,000 a year from medicolegal reports, medicals and other such work to be able to itemise all services and demonstrate which were VAT-able and which were not.
VAT returns must be made quarterly as opposed to annually for superannuable income tax returns.
Paul Samrah, a partner at Kingston Smith, based in Redhill, Surrey, said many practices would have to improve the quality of their record keeping for visits from VAT inspectors.
'You have to be mindful of the fact you are opening yourself up to another organisation. With Customs having merged with Inland Revenue they might bring the taxman as well.'
Rosemary Smith, GP liaison manager at Sandison Easson, in Wilmslow, Cheshire, said: 'People are going to have to be very careful.
'GPs must make sure their bookwork is impeccable. There are still a lot of people on old IT systems. It's really important everything is spot on.'
Ms Smith said GPs could set up a separate company for the VAT-able work in order to minimise confusion.
But they should beware of potential methods of getting round the rules, such as by forming individual companies so as to take each of their incomes below the threshold.
Barry Stocks, a VAT expert with accountants PKF, based in London, said creating several individual companies for the same type of work in the same practice may be viewed as tax evasion.