The management of tax expenditures

HMT should: a) establish a framework for designing and administering tax expenditures that is commensurate with the large number of UK tax expenditures. The framework should draw on ‘Green Book’ principles, international good practice and stakeholder views;

j) include trend data on the number of beneficiaries of tax expenditures in published analysis, where possible, and take account of this within commentaries.

c) consider specifying time-periods or triggers for evaluation and review when designing each tax expenditure;

d) each year review whether the objectives of tax expenditures still align with government objectives; and

e) establish and document clear requirements for officials to report concerns about the value for money of tax expenditures to ministers, for example by specifying accountability arrangements.

HMRC should: f) further develop categorisation of tax expenditures according to, for example, their objectives, scale, age and risks, in order to inform the allocation of administrative resources in proportion to the cost and impact that tax expenditures are intended to achieve;

g) identify and use independent data sources, where available, to further test reasons for movements in the cost of high-priority tax expenditures;

h) develop a more systematic approach to the evaluation of tax expenditures to provide greater coverage. We estimate that the external cost of commissioning evaluations of six tax expenditures a year would likely be between £1 million and £1.5 million. This estimate does not include the cost of HMRC’s own internal costs, which could be significant;

i) develop an approach so that it understands and can report the differences between actual and forecast cost for tax expenditures it regards as high-priority in its published analysis. In cases where it is not feasible to make a comparison for a high-priority tax expenditure, HMRC should explain why; and