Finance Bill 2004: CIOT representations and revenue department responses
The legislation is now in the Income Tax (Earnings and Pensions) Act 2003. Pt. 4, Ch. 7 gives a limited exemption from tax for a maximum of £8,000 removal benefit and expenses. No liability to income tax in respect of earnings arises by virtue of the provision of removal benefits or expenses below that limit to which ITEPA 2003, ss. 271 to 287 applies. This exemption from taxation for the defined expenses incurred as a result of a relocation is only available to employees and employer-provided assistance. The self employed do not enjoy any similar relief.
Medical General Practitioners have many of the characteristics of being employees of the NHS but most local doctors working in general practice are actually treated as self employed for tax purposes. The Inland Revenue were asked to clarify their view of the relocation grant which is available to a doctor considering a residential move to start a medical practice in a remote area. The Red book provides that a grant of up to £2,000 may be paid to the doctor. The Revenue statement is:-
'We [the Inland Revenue] have considered the Show Scotland NHS site Chapter 15 "Recruitment and Retention Incentive Payments to GPs" which deals with Golden Hellos, Areas Attracting Additional Payments, Relocation Costs, Recruitment Costs and Retention Incentives. This covers payments made to both employed and self employed GPs but fails to mention that the payments will be treated differently for tax purposes.
Most GPs are treated as self employed for tax purposes and therefore any payments made to them in respect of continuing their trade would be treated as income and taxed accordingly. The legislation introduced in 1993 restricted a more generous concessionary practice for employer-provided relocation benefits and expenses, and was deliberately and explicitly confined to what employers provided to employees. There are many other differences between the treatment of expenses for employees and the self-employed - mostly perceived as more generous to the self-employed. While all legislation is kept under review, there are no plans to change the treatment of relocation grants.
The CIOT is grateful to The Institute of Chartered Accountants of Scotland for this information.
Technical Department 020 7235 9381