Source · Select Committees · Treasury Committee
Twentieth Report - Tax Reliefs
Treasury Committee
HC 723
Published 26 July 2023
Recommendations
2
Rejected
Para 9
Undertake comprehensive review of existing tax reliefs for simplification and ease of adherence.
Recommendation
We recommend that the Government undertake a comprehensive and systematic review of existing tax reliefs to look for opportunities for simplification. In doing so, they should in particular look for ways of making it easier for taxpayers to adhere to …
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Government Response Summary
The government rejects the recommendation for a comprehensive and systematic review of tax reliefs, arguing it would not be an effective use of resources and would create significant uncertainty. It states it is already committed to simplifying the tax system and keeps all tax reliefs under review.
HM Treasury
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4
Rejected
Para 26
Publish cost data for all tax reliefs from the 2025/26 tax year onwards
Recommendation
There are 1,180 tax reliefs, but HMRC only publishes estimated cost data for 365, leaving 815 uncosted. We recommend HMRC publish cost data for all tax reliefs from the 2025/26 tax year onwards.
Government Response Summary
The government agrees on the importance of publishing tax relief data but rejects publishing cost data for all reliefs. It argues that for many structural reliefs, the data is unavailable or would impose disproportionate burdens on taxpayers, and highlights significant progress in costing non-structural reliefs.
HM Treasury
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5
Rejected
Para 27
Reclassify tax reliefs as Government expenditure to enable value for money assessments
Recommendation
We recommend the Treasury reclassify tax reliefs as Government expenditure. This would subject reliefs to established value for money assessment, leading to improved scrutiny and ultimately better policy.
Government Response Summary
The government rejects reclassifying tax reliefs as government expenditure, stating that existing parliamentary scrutiny and Green Book principles via the Joint Tax Relief Framework are sufficient, and such reclassification is unnecessary and inappropriate given the qualitative difference between tax and spend.
HM Treasury
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6
Rejected
Ensure relevant departments take responsibility for budgeting non-structural tax reliefs with Treasury oversight
Recommendation
We recommend that Government consider how to ensure that the relevant delivery department takes more responsibility for the budgeting for each non-structural tax relief, those designed to promote particular behaviours, in conjunction with the Treasury. This would be intended to …
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Government Response Summary
The government rejects the recommendation for delivery departments to take more responsibility for budgeting non-structural tax reliefs, stating that existing parliamentary scrutiny, Green Book principles, and the Joint Tax Relief Framework are sufficient, and that tax reliefs are qualitatively different from spending.
HM Treasury
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7
Accepted
Monitor maintained tax reliefs for abuse indicators, including external consultation on policy design
Recommendation
Tax reliefs have been abused. The most straightforward way to reduce opportunities for such abuse is to simplify the tax system. Where tax reliefs are maintained, we recommend the Government monitor them for indications of abuse as part of ongoing …
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Government Response Summary
The government states it already meets the recommendation, affirming it takes abuse seriously and actively monitors tax reliefs. It details existing processes including inter-departmental collaboration, seeking external consultation, continual monitoring of costs and take-up, and using various tools to address abuse.
HM Treasury
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10
Rejected
Institute five-yearly reviews with public consultation for tax reliefs, committing to remove ineffective ones
Recommendation
We recommend that the Government institutes a system of five-yearly reviews, incorporating public consultation, for tax reliefs. Where these reviews find tax reliefs which no longer achieve policy objectives, are vulnerable to abuse, or have estimated costs significantly higher than …
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Government Response Summary
The government rejects instituting a system of five-yearly reviews for all tax reliefs, arguing that extensive existing monitoring by HMRC, annual Finance Bill processes, and previous evaluations already achieve the objective of scrutiny, and that the proposed system would create undesirable uncertainty for taxpayers.
HM Treasury
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Conclusions (4)
1
Conclusion
Accepted
Para 8
The tax system is too complicated. The huge and seemingly ever-expanding suite of tax reliefs is an important factor in that complexity. We welcome, and will monitor, the Treasury’s commitment to simplifying the tax system. That simplification cannot merely focus on proposed new policies.
Government Response Summary
The government affirms its existing commitment to simplifying the tax system, with the Chancellor taking personal responsibility and a mandate for officials to focus on both new and existing rules, stating that most reliefs work well and reviews are already underway where needed.
3
Conclusion
Acknowledged
Para 25
Tax reliefs account for considerable reduction in tax revenue. They require adequate data to be collected and published to inform proper policymaking or accountability. However, the evidence shows that this is not happening. The disparity between scrutiny of tax reliefs and that of equivalent direct public expenditure is stark.
Government Response Summary
The government agrees on the importance of collecting and publishing data on tax reliefs, stating that HMRC already provides extensive costings and evaluations. It commits to expanding these where possible, while also explaining limitations regarding structural reliefs and taxpayer burdens.
8
Conclusion
Rejected
Para 40
Political pressure, including through lobbying, tends to promote both the creation of new tax reliefs and the retention of existing reliefs. Tax reliefs long detached from their original policy purpose clutter an ever more complex tax system. We are concerned that there is no routine within Government to identify and …
Government Response Summary
The government is already committed to simplifying the tax system and keeps all tax reliefs under review. They do not feel a review of the kind recommended by the Committee would be an effective use of limited resources, saying constant reviews would essentially be creating uncertainty for taxpayers.
9
Conclusion
Rejected
Para 50
We have taken evidence on several options for seeking to remove outdated tax reliefs from the statute book. A “one in, one out” rule for tax reliefs would be a blunt instrument which could reduce flexibility in policy-making. Sunset clauses have their place, but tax relief expiry dates can act …
Government Response Summary
The government rejected the recommendation for a formal five-yearly review system for tax reliefs, stating it already keeps tax reliefs under review and that such a system would be an ineffective use of resources and create uncertainty for taxpayers.