Twelfth Report: Management of tax reliefs

Select Committee
Public Accounts Committee HC 379 20 July 2020
Report Status Government responded
Conclusions & Recommendations 30 items (14 recs)
Source View on Parliament website
Government Response (AI assessment · 29 of 30 classified)
Accepted 18
Accepted in Part 5
Acknowledged 2
Not Addressed 2
Rejected 2
Government response
Treasury minutes: Government response to the Committee of Public Accounts on the Twelfth report from Session 2019-21 · published 25 Mar 2021
Read the government response ↗ Response on the tracker
Clear

Recommendations & Conclusions

18 results
4 Recommendation Accepted
HMRC cannot explain why the cost of some tax reliefs is considerably greater than government...
Recommendation
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 Summary
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
View Details
6 Recommendation Accepted
HMRC and HM Treasury are far too slow in identifying and responding to some of...
Recommendation
HMRC and HM Treasury are far too slow in identifying and responding to some of the most serious problems identified with reliefs, including cases of abuse. In June 2014, we found that the exchequer departments did not respond promptly to … Read more
Government Response Summary
The government agrees to explain how it will accelerate its response to problems with tax reliefs, stating it already keeps them under review and takes action. It further commits to setting and publishing criteria for evaluating tax reliefs and considering indicators to enhance understanding of their value.
HM Treasury
View Details
8 Conclusion Accepted
The need for greater monitoring of the impact of tax reliefs was also raised with...
Conclusion
The need for greater monitoring of the impact of tax reliefs was also raised with us by key stakeholders in the sector. We heard from the Chartered Institute of Taxation, which raised concerns about “the almost total lack of attention, … Read more
Government Response Summary
The government recognises the importance of transparency and commits that HMRC will implement a more structured programme of internal evaluation work in 2021, with plans to start publishing this analysis from the same year.
HM Treasury
View Details
9 Conclusion Accepted
Evaluations typically cost between £50,000 and £250,000.
Conclusion
Evaluations typically cost between £50,000 and £250,000. The NAO estimated that HMRC had spent around £2 million on evaluating tax reliefs since 2015. HMRC has an annual central research budget of £2 million per year to fund evaluations of tax … Read more
Government Response Summary
The government states HMRC will continue to publish external evaluations and include relevant internal findings in consultation documents, and will implement a structured programme to publish internal analysis from 2021, subject to ministerial approval.
HM Treasury
View Details
12 Conclusion Accepted
HMRC collects and reports data on who benefits from some tax reliefs.
Conclusion
HMRC collects and reports data on who benefits from some tax reliefs. For example, HMRC reports annually on the number of people gaining from entrepreneurs’ relief 13 Written Evidence MTE0002 – Mr Richard Wild, Chartered Institute of Taxation, published 10 … Read more
Government Response Summary
The government agrees with the committee, and HMRC will improve accessibility of data in its statistics and publicly report more information on beneficiaries of significant non-structural tax reliefs by the end of 2021, subject to data availability.
HM Treasury
View Details
13 Conclusion Accepted
We asked HMRC what assessment it had made to determine who benefited from another large...
Conclusion
We asked HMRC what assessment it had made to determine who benefited from another large tax relief, the VAT relief on the construction of new dwellings. HMRC forecast that the relief cost £15 billion in 2018–19. We asked whether the … Read more
Government Response Summary
The government agrees, and HMRC will improve the accessibility of its statistics and publicly report more information on beneficiaries of significant non-structural tax reliefs by the end of 2021, where data is available, acknowledging limitations for some reliefs like VAT on new dwellings.
HM Treasury
View Details
15 Conclusion Accepted
We were concerned that the lack of available information on some large reliefs had meant...
Conclusion
We were concerned that the lack of available information on some large reliefs had meant that it was not possible for HMRC and HM Treasury to know whether all of those who were expected to benefit had been able to … Read more
Government Response Summary
The government agrees to publish available data showing who benefits from pension tax reliefs by December 2021, acknowledging data limitations but committing to work towards improving published information.
HM Treasury
View Details
17 Recommendation Accepted
When we examined tax reliefs in June 2014, we found that many tax reliefs were...
Recommendation
When we examined tax reliefs in June 2014, we found that many tax reliefs were introduced without clear objectives. As part of our evidence session in 2014, HM Treasury told us that it was rare to have detailed objectives for … Read more
Government Response Summary
The government accepts the recommendation and will explore the best way to collate and publish the objectives of non-structural tax reliefs throughout 2021, with a target implementation date of Autumn 2021.
HM Treasury
View Details
18 Recommendation Accepted
Some tax reliefs incentivise behaviour, while others represent a choice by government to reduce the...
Recommendation
Some tax reliefs incentivise behaviour, while others represent a choice by government to reduce the tax burden on particular groups or sectors. In 2019, HMRC completed an assessment of reliefs with economic and social objectives, resulting in them being grouped … Read more
Government Response Summary
The government accepts the recommendation and will explore the best way to collate and publish the objectives of non-structural tax reliefs throughout 2021, with a target implementation date of Autumn 2021.
HM Treasury
View Details
19 Recommendation Accepted
We asked the exchequer departments why new reliefs were being introduced with unclear objectives.
Recommendation
We asked the exchequer departments why new reliefs were being introduced with unclear objectives. HMRC responded that some tax reliefs were expected to apply to a certain group and reflected a political choice about who or what to tax. It … Read more
Government Response Summary
The government accepts the recommendation and will explore the best way to collate and publish the objectives of non-structural tax reliefs throughout 2021, with a target implementation date of Autumn 2021.
HM Treasury
View Details
20 Recommendation Accepted
When we examined tax reliefs in 2014 we found that HMRC published estimates of only...
Recommendation
When we examined tax reliefs in 2014 we found that HMRC published estimates of only 46 reliefs which had economic and social objectives.35 Since then HMRC has responded to our recommendations that it be more transparent. In October 2019, it … Read more
Government Response Summary
The government accepts the recommendation, committing to HMRC publishing external evaluations and internal findings in consultation documents, and initiating a structured internal evaluation program from 2021, with a target implementation date of December 2021.
HM Treasury
View Details
21 Recommendation Accepted
Government’s published estimates of the costs of tax reliefs are prepared by HMRC and scrutinised...
Recommendation
Government’s published estimates of the costs of tax reliefs are prepared by HMRC and scrutinised by the Office for Budget Responsibility (OBR) in its role as the government’s official forecaster. Higher costs can indicate that a tax relief is working … Read more
Government Response Summary
The government accepts the recommendation, stating that HMRC will expand commentary on the variance of high priority non-structural tax reliefs over time in its 2020 statistics and plans to publish more information on initial forecast estimates from October 2020.
HM Treasury
View Details
22 Conclusion Accepted
HMRC has not compared the costs of tax reliefs to government’s original published forecasts.
Conclusion
HMRC has not compared the costs of tax reliefs to government’s original published forecasts. The NAO examined the costs of ten tax reliefs introduced since 2013. Of these, the costs of four tax reliefs were at least double government’s original … Read more
Government Response Summary
The government agrees and states that HMRC will expand commentary on cost variance in 2020 statistics and plans to publish more information on initial forecast estimates for high priority non-structural tax reliefs starting October 2020.
HM Treasury
View Details
23 Conclusion Accepted
We asked the exchequer departments whether reliefs costing double what HMRC had forecast meant that...
Conclusion
We asked the exchequer departments whether reliefs costing double what HMRC had forecast meant that they were out of control. They asserted that they could not anticipate everything when they made their forecasts. They outlined factors that could affect costs … Read more
Government Response Summary
The government accepts the implied recommendation to address forecast variances by expanding commentary on costs and publishing more information on initial forecast estimates in its tax relief statistics, starting October 2020.
HM Treasury
View Details
24 Recommendation Accepted
We asked HMRC and HM Treasury what action they took to follow up on cost...
Recommendation
We asked HMRC and HM Treasury what action they took to follow up on cost forecasts and understand the actual costs of new tax reliefs. HM Treasury told us that there was a variety of reasons why the cost of … Read more
Government Response Summary
The government agrees with the recommendation, and HMRC will expand commentary on cost variances over time for high priority non-structural tax reliefs in its 2020 statistics, and publish more information on initial forecast estimates starting in October 2020.
HM Treasury
View Details
26 Conclusion Accepted
In our June 2014 report on tax reliefs we concluded that the exchequer departments did...
Conclusion
In our June 2014 report on tax reliefs we concluded that the exchequer departments did not respond promptly to unexpected increases in the costs of reliefs. We found that HMRC took time to react when it noticed a cost increase … Read more
Government Response Summary
The government agrees to accelerate response times for tax reliefs, stating it already keeps them under review and takes action, but also committing to set and publish criteria for evaluating tax reliefs and consider indicators to improve understanding of their value.
HM Treasury
View Details
28 Conclusion Accepted
Research and development tax relief for small- and medium-sized enterprise is designed to support companies...
Conclusion
Research and development tax relief for small- and medium-sized enterprise is designed to support companies that work on innovative projects in science and technology.57 The cost of the research and development relief for small- and medium-sized enterprises increased from £0.8 … Read more
Government Response Summary
The government outlines existing steps taken to combat abuse of R&D tax relief, including using ‘spotlights’ to warn of concerns, increasing compliance staff by 100 FTE, requiring CT600 forms with tax computations from April 2019, and engaging with the R&D Consultative Committee.
HM Treasury
View Details
30 Conclusion Accepted
The main cause of lost tax on the research and development scheme for small- and...
Conclusion
The main cause of lost tax on the research and development scheme for small- and medium-sized enterprises is from poor quality claims, which has been an issue since the scheme was introduced. We raised the issue with HMRC of the … Read more
Government Response Summary
The government reiterates its actions to combat abuse and poor-quality R&D claims, including using ‘spotlights’ for warnings, increasing compliance staff by 100 FTE, implementing new CT600 filing requirements from April 2019, and regular engagement with the R&D Consultative Committee.
HM Treasury
View Details