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

3 results

2 Recommendation Not Addressed

Twelfth Report: Management of tax …

HMRC and HM Treasury are insufficiently curious about the impact of some key tax reliefs...

HMRC and HM Treasury are insufficiently curious about the impact of some key tax reliefs on different groups. Data on who benefits from tax reliefs are crucial to understanding whether they are achieving their intended objectives and to informing decisions … Read more

Government Response

The government states it 'agrees with the Committee’s recommendation' but then provides a response entirely focused on pandemic contingency planning, PPE supply chains, and business support measures, completely failing to address the recommendation about assessing and publishing data on beneficiaries of tax reliefs.

HM Treasury

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16 Conclusion Not Addressed

Twelfth Report: Management of tax …

We asked the exchequer departments when they would take action on the issue of workers...

We asked the exchequer departments when they would take action on the issue of workers not receiving pension tax relief.27 HM Treasury said the Government recognises the different impacts of the two systems of paying pension tax relief on pension … Read more We asked the exchequer departments when they would take action on the issue of workers not receiving pension tax relief.27 HM Treasury said the Government recognises the different impacts of the two systems of paying pension tax relief on pension contributions for workers earning below the personal allowance. It referred to the Government’s announcement in Budget 2020 that a call for evidence would be published in spring 2020 on this subject. The call was due to ask for views on how to address the different pension outcomes for lower earners, depending on whether their employer’s pension scheme used the net pay or relief at source method of tax relief on their pension 21 HMRC, Capital Gains Tax statistical tables, August 2019, Table 4 22 Budget Speech 2020, available at https://www.gov.uk/government/speeches/budget-speech-2020 23 Q51 24 HMRC, Personal pensions: contribution and tax relief statistics, October 2019 25 Written Evidence MTE0003 – Management of tax reliefs, Ruari Grant (Senior Public Affairs Associate, Standard life Aberdeen) published 10 June 2020 26 Royal London, New FOI reveals far more low-paid workers missing out on pension tax relief than previously thought, April 2019 27 Q49 12 Management of tax reliefs contributions.28 HM Treasury told us that in the light of COVID-19 the Government was considering the publication of this and other Government documents on a case by case basis. It planned to provide more information on the timeframe for publication of this call for evidence in due course.29 28 Net pay is where the employer takes pension contributions from an individual’s pay before it is taxed. Relief at source is where the employer takes pension contributions after tax and National Insurance has been taken from an individual’s pay. 29 Q 49, Letter from Beth Russell, Director General, Tax and Welfare, HM Treasury, 26th June 2020 and HMRC, Guidance – Pension schemes newsletter 118, March 2020; and HMG Workplace pensions Management of tax reliefs 13 Show less

Government Response

The government reiterates its recognition of the different impacts of pension tax relief systems for lower earners and refers to its Budget 2020 announcement of a call for evidence, without providing new information or an updated timeframe.

HM Treasury

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29 Conclusion

Twelfth Report: Management of tax …

The cap was due to be introduced in April 2020, which would have given companies...

The cap was due to be introduced in April 2020, which would have given companies until 2022–23 to make claims under existing rules. HMRC estimated that the proposed changes would have saved the Exchequer around £45 million a year. However, … Read more

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