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

5 results

3 Recommendation Accepted in Part

Twelfth Report: Management of tax …

The exchequer departments are not transparent with Parliament on which tax reliefs need to change...

The exchequer departments are not transparent with Parliament on which tax reliefs need to change taxpayer behaviour for government objectives to be achieved. Tax reliefs that are designed to change behaviour require more attention 6 Management of tax reliefs than … Read more

Government Response

The government agrees with both recommendations. For HMRC publishing a list of reliefs with behavioural objectives, the target date is Autumn 2021, with plans to explore the best way to collate this information. For HM Treasury identifying behavioural objectives and measurement in Budget documents (TIINs), the government aims to ensure this happens for new or amended tax reliefs by Autumn 2020 and will measure impact through monitoring and evaluation.

HM Treasury

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5 Recommendation Accepted in Part

Twelfth Report: Management of tax …

HMRC and HM Treasury do not publish sufficient information on the value for money of...

HMRC and HM Treasury do not publish sufficient information on the value for money of tax reliefs to enable Parliament to hold government to account. In response to examinations by this Committee, HMRC now publishes a list of all tax … Read more

Government Response

The government accepts that HMRC will publish results of internal and external evaluations, with a more structured program for internal analysis starting in 2021. However, it rejects the recommendation for HM Treasury to publish an annual report on value for money assessments, stating these are confidential policy advice to Ministers.

HM Treasury

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7 Conclusion Accepted in Part

Twelfth Report: Management of tax …

We were dissatisfied at the fact that none of the ten largest tax reliefs had...

We were dissatisfied at the fact that none of the ten largest tax reliefs had been properly externally reviewed by HMRC.10 We asked HMRC why it had not evaluated any of these reliefs, such as pension reliefs. HMRC explained that … Read more

Government Response

The government agrees to establish and publish criteria for evaluating tax reliefs by December 2020, but rejects the recommendation to evaluate pension tax reliefs within 12 months, stating it is not the right time for a formal evaluation.

HM Treasury

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14 Recommendation Accepted in Part

Twelfth Report: Management of tax …

We also asked who benefited from pension tax reliefs, and the split between different types...

We also asked who benefited from pension tax reliefs, and the split between different types of pensions. HMRC told us that its aim was to be fully transparent with all the information that it held, and referred to the work … Read more

Government Response

The government accepts the recommendation for HMRC to publish data showing who benefits from pension tax reliefs by December 2021, though it notes limitations due to insufficient data for all protected characteristics.

HM Treasury

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25 Recommendation Accepted in Part

Twelfth Report: Management of tax …

In March 2015, we concluded that there was inadequate assessment of the value for money...

In March 2015, we concluded that there was inadequate assessment of the value for money of tax reliefs.45 In 2017, HM Treasury began to make assessments of the value for money of tax reliefs and by 2019 had assessed the … Read more

Government Response

The government partially accepts, committing to HMRC publishing external and internal evaluations from 2021, but rejects publishing HM Treasury's value for money assessments due to their confidential nature as policy advice, while also committing to consider developing a robust value for money methodology.

HM Treasury

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Government Response AI assessment · 29 of 14 classified

Accepted 18

Accepted in Part 5

Acknowledged 2

Not Addressed 2

Rejected 2

Total 14 recs + 16 conclusions

Correspondence 3 letters

13 Jan 2021 Correspondence from Jim Harra, Chief Executive and First Permanent Secretary, HM Revenue & Customs, and Tom Scholar, Permanent Secretary, HM Treasury, re Twelfth Report of Session 2019-21 Management of tax reliefs: implementing recommendation 3b, dated 22 December 2020

Parliament page

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

Parliament page

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

Parliament page