The PAC report on tax reliefs

The Public Accounts Committee (PAC) has today published a report on tax reliefs. We read it with interest, as we conducted a report into tax reliefs in 2011.

The OTS also contributed to the work that produced the PAC report, giving the National Audit Office an updated total of tax reliefs across the tax system. In our original report in 2011 we found there were 1,042 reliefs in the tax system; earlier this year we updated our list for intervening Finance Acts and came to a figure of 1,128. We’ll review the list further in the light of the current Finance Bill when that is passed by Parliament.

The OTS work on tax reliefs focussed on a sample of 155 reliefs. Our report recommended various abolitions and enhancements, but to us the main point we were making was that there was no systematic review and evaluation process of tax reliefs. The OTS report is referred to regularly in the PAC report, which is pleasing.

Our review went back to the original policy for each relief (which of course took some digging for some long-established provisions!); we looked at how the relief was operating today – and whether it seemed to be meeting those original aims. We were interested in the administrative costs – to taxpayers and HMRC – of its operation. Whether the relief was delivering value for money was something we tried to review but inevitably that gets more into policy judgments. We also recognised that some reliefs have been abused for tax avoidance, leading to complex anti-avoidance rules.

The PAC report picks up our theme of there needing to be more systematic review of the operation of reliefs, referring to a need for a ‘system of control’. We remain interested in the subject of reliefs and although we haven’t formally carried on our 2010/11 project, inevitably it’s a subject that crops up in all our projects (for example our current Competitiveness review has heard a lot about improving the operation of Research and Development tax relief). So we would welcome the chance to do further work in the area.

John Whiting

26 June 2014

 

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