UK Inquiry Tracker

Management of tax reliefs

Public Accounts Committee Closed Inquiry

Opened: 27 May 2020 Closed: 14 Sep 2020 Parliament page

The Committee has opened an inquiry into the UK’s management of “tax expenditures”: tax reliefs which are granted on certain activities or goods. There are two broad categories of tax reliefs: structural tax reliefs that are integral parts of the tax system - like the basic rate of income tax … Read more The Committee has opened an inquiry into the UK’s management of “tax expenditures”: tax reliefs which are granted on certain activities or goods. There are two broad categories of tax reliefs: structural tax reliefs that are integral parts of the tax system - like the basic rate of income tax relief - and non-structural tax reliefs or “tax expenditures” where the government opts not to collect a portion of tax for social or economic objectives - like tax credits for companies’ research and development costs, or income tax relief on pension contributions. Some tax expenditures simply reflect a policy choice by ministers to support particular groups or sectors, like the housing market, while others are designed to incentivise behaviour by making a choice more or less expensive. In the UK the largest tax expenditures are the reliefs on pension contributions, not charging VAT on food and new dwellings, and not charging capital gains tax on people’s main home. Tax “expenditures” reduce the amount of tax collected, rather than allocating tax resources after they’re collected as in the traditional idea of public spending. The UK tax system has over 300 of this kind of tax reliefs, which cost the Government an estimated £155 billion of foregone tax revenues in 2018-19, but National Audit Office evaluations have shown that the impact of applying different tax reliefs is not guaranteed, and many require careful monitoring to ensure the tax expenditure, the tax revenue given up, is “money well spent”. In a report published in February this year the NAO repeated previous concerns about the effectiveness of HM Treasury’s and HM Revenue & Customs management of tax expenditures . It found that there is no formal framework governing the administration or oversight of tax expenditures, and that while HMRC and HM Treasury have begun welcome steps to increase their oversight of tax expenditures and more actively consider their value for money, these will not be sufficient on their own to address value-for‑money concerns. To do that, the NAO found that the departments must formally establish their accountabilities for tax expenditures and enable greater transparency, pointing to lessons that can be learned from other countries that have established clear arrangements for evaluating and reporting on tax expenditures, and calling on HM Treasury and HMRC to follow suit by clarifying arrangements for value for money and improving the evaluation and public reporting of tax expenditures. Later in June the Committee will question officials from HM Treasury, and Her Majesty’s Revenue and Customs, on management of tax reliefs, the number of reliefs and the Government’s understanding of whether they represent value for money. The Committee is now inviting evidence on the questions of accountability and value for money in tax expenditures raised by the NAO report: please make your submissions here before close of Friday 5 June 2020 Show less

14 Recommendations

16 Conclusions

1 Report

1 Oral session

3 Letters

1 Event

Activity timeline 6 events

25 Mar
2021

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Twelfth report from Session 2019-21

13 Jan
2021

Correspondence

Correspondence from Jim Harra, Chief Executive and First Permanent Secretary, HM Revenue & Customs, and Tom Scholar, Permanent Secretary, H…

20 Jul
2020

Report published

Twelfth Report: Management of tax reliefs

6 Jul
2020

Correspondence

Correspondence from HM Revenue and Customs on the Committee's inquiry Management of tax reliefs, dated 26 June 2020

6 Jul
2020

Correspondence

Correspondence from HM Treasury on the Committee's inquiry Management of tax reliefs, dated 26 June 2020

10 Jun
2020

Oral evidence

Management of tax reliefs

Oral evidence sessions 1 session

10 Jun 2020

View on parliament.uk

Management of tax reliefs

Beth Russell · Her Majesty's Treasury Jim Harra · HMRC Ruth Stanier · HM Revenue and Customs Sir Tom Scholar · HM Treasury

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
Twelfth Report: Management of tax reliefs	HC 379	20 Jul 2020	30	Responded

Recommendations & Conclusions

18 results

4 Recommendation Accepted

Twelfth Report: Management of tax …

HMRC cannot explain why the cost of some tax reliefs is considerably greater than government...

HMRC cannot explain why the cost of some tax reliefs is considerably greater than government forecasts presented to Parliament. Government forecasts of the cost of tax reliefs are prepared by HMRC and scrutinised by the Office for Budget Responsibility (OBR). … Read more

Government Response

The government agrees with the recommendation. HMRC will expand commentary on cost variances and their reasons in the 2020 statistical publication and publish more information on initial forecast estimates for high priority non-structural tax reliefs starting in October 2020, explaining where comparisons are not feasible.

HM Treasury

Management of tax reliefs

Activity timeline 6 events

Oral evidence sessions 1 session

Reports 1 report · click to expand

Recommendations & Conclusions

HMRC cannot explain why the cost of some tax reliefs is considerably greater than government...

HMRC and HM Treasury are far too slow in identifying and responding to some of...

The need for greater monitoring of the impact of tax reliefs was also raised with...

Evaluations typically cost between £50,000 and £250,000.

HMRC collects and reports data on who benefits from some tax reliefs.

We asked HMRC what assessment it had made to determine who benefited from another large...

We were concerned that the lack of available information on some large reliefs had meant...

When we examined tax reliefs in June 2014, we found that many tax reliefs were...

Some tax reliefs incentivise behaviour, while others represent a choice by government to reduce the...

We asked the exchequer departments why new reliefs were being introduced with unclear objectives.

When we examined tax reliefs in 2014 we found that HMRC published estimates of only...

Government’s published estimates of the costs of tax reliefs are prepared by HMRC and scrutinised...

HMRC has not compared the costs of tax reliefs to government’s original published forecasts.

We asked the exchequer departments whether reliefs costing double what HMRC had forecast meant that...

We asked HMRC and HM Treasury what action they took to follow up on cost...

In our June 2014 report on tax reliefs we concluded that the exchequer departments did...

Research and development tax relief for small- and medium-sized enterprise is designed to support companies...

The main cause of lost tax on the research and development scheme for small- and...

Government Response AI assessment · 29 of 14 classified

Correspondence 3 letters