Recommendations & Conclusions
30 items
2
Recommendation
Twelfth Report: Management of tax relie…
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 about which tax reliefs need amending. When he announced in …
Government response. The Government agrees with the Committee’s recommendation. Or after the end of the pandemic, whichever is first. Contingency planning across government operates under a framework of subsidiarity, with designated lead government departments for specific risks and impacts. A number of …
HM Treasury
3
Conclusion
Twelfth Report: Management of tax relie…
The exchequer departments are not transparent with Parliament on which tax reliefs need to change taxpayer behaviour for government objectives to be achieved. Tax reliefs that are designed to change behaviour require more attention 6 Management of tax reliefs than those which are intended to simply benefit a specific group …
Government response. 3: PAC conclusion: The exchequer departments are not transparent with Parliament on which tax reliefs need to change taxpayer behaviour for government objectives to be achieved. 3a: PAC recommendation: HMRC should, within three months, publish a list of all new …
HM Treasury
4
Conclusion
Twelfth Report: Management of tax relie…
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). The costs of some new tax reliefs are double the …
Government response. 4: PAC conclusion: HMRC cannot explain why the cost of some tax reliefs is considerably greater than government forecasts presented to Parliament. 4: PAC recommendation: HMRC should, as part of its next annual statistical publication on tax reliefs due in …
HM Treasury
5
Conclusion
Twelfth Report: Management of tax relie…
HMRC and HM Treasury do not publish sufficient information on the value for money of tax reliefs to enable Parliament to hold government to account. In response to examinations by this Committee, HMRC now publishes a list of all tax reliefs which support government objectives, and now reports costs for …
Government response. 5: PAC conclusion: HMRC and HM Treasury do not publish sufficient information on the value for money of tax reliefs to enable Parliament to hold government to account. 5a: PAC recommendation: HMRC should ensure that the results of internal, as …
HM Treasury
6
Conclusion
Twelfth Report: Management of tax relie…
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 unexpected increases in the costs of tax reliefs. In March …
Government response. 6: PAC conclusion: 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. 6: PAC recommendation: HMRC and HM Treasury should, within 3 months, …
HM Treasury
1
Conclusion
Twelfth Report: Management of tax relie…
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury and HM Revenue & Customs (HMRC).1
Government response. Based on a report by the National Audit Office, the Committee took evidence, on 10 June 2020 from HM Treasury and HM Revenue and Customs. The Committee published its report on 13 July 2020. This is the Government response to …
HM Treasury
7
Conclusion
Twelfth Report: Management of tax relie…
We were dissatisfied at the fact that none of the ten largest tax reliefs had been properly externally reviewed by HMRC.10 We asked HMRC why it had not evaluated any of these reliefs, such as pension reliefs. HMRC explained that cost was only one factor it took into account in …
Government response. 1: PAC conclusion: The Committee are concerned that HMRC does not understand the impact of any of the largest tax reliefs, including reliefs on pensions which were forecast to cost £38 billion in 2018–19. 1a: PAC recommendation: HMRC should: within …
HM Treasury
8
Conclusion
Twelfth Report: Management of tax relie…
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, at least so far as is visible to the outside …
Government response. 5.2 The government recognises the importance of transparency in providing information to inform the understanding of tax reliefs. HMRC includes links to external evaluations and research reports about tax reliefs in the annual statistics publications. HMRC will continue to publish …
HM Treasury
9
Conclusion
Twelfth Report: Management of tax relie…
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 reliefs and other research to inform its wider business and …
Government response. 5.2 The government recognises the importance of transparency in providing information to inform the understanding of tax reliefs. HMRC includes links to external evaluations and research reports about tax reliefs in the annual statistics publications. HMRC will continue to publish …
HM Treasury
10
Conclusion
Twelfth Report: Management of tax relie…
Tax reliefs on pensions contributions, designed to encourage people to save for their own personal pensions, are among the largest tax reliefs. HMRC forecast that the gross cost of these reliefs totalled £38 billion in 2018–19.18 We were concerned by claims that the tax relief was not being taken up …
Government response. 1.3 The Government disagrees with the Committee’s recommendation. 1.4 The Government has undertaken several consultations on aspects of pensions tax relief over the last few years, including: a. Pensions tax relief administration: call for evidence (July 2020) b. Public service …
HM Treasury
11
Conclusion
Twelfth Report: Management of tax relie…
We asked how the exchequer departments could be sure of the impact that pension tax reliefs were having if they had not evaluated them. HMRC asserted that pension reliefs had been subject to extensive evaluative attention, with “virtually no stone left unturned” as part of work to strengthen the incentive …
Government response. 1.3 The Government disagrees with the Committee’s recommendation. 1.4 The Government has undertaken several consultations on aspects of pensions tax relief over the last few years, including: a. Pensions tax relief administration: call for evidence (July 2020) b. Public service …
HM Treasury
12
Conclusion
Twelfth Report: Management of tax relie…
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 June 2020 14 C&AG’s report, paras 3.4 and 3.5 15 …
Government response. 2.1 The Government agrees with the Committee’s recommendation. Target implementation date: December 2021 2.2 HMRC recognises the importance of publishing more information to aid understanding of the use of tax reliefs. HMRC already publishes statistics about groups and sectors benefitting …
HM Treasury
13
Conclusion
Twelfth Report: Management of tax relie…
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 relief would distinguish between the benefit of someone spending large …
Government response. 2.1 The Government agrees with the Committee’s recommendation. Target implementation date: December 2021 2.2 HMRC recognises the importance of publishing more information to aid understanding of the use of tax reliefs. HMRC already publishes statistics about groups and sectors benefitting …
HM Treasury
14
Conclusion
Twelfth Report: Management of tax relie…
We also asked who benefited from pension tax reliefs, and the split between different types of pensions. HMRC told us that its aim was to be fully transparent with all the information that it held, and referred to the work that had been undertaken to support the government’s 2015 review …
Government response. 2.4 The Government agrees with the Committee’s recommendation. Target implementation date: December 2021 2.5 HMRC will publish data showing who is benefitting from pensions reliefs to the extent data is available. HMRC publishes annual statistics showing the total costs of …
HM Treasury
15
Conclusion
Twelfth Report: Management of tax relie…
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 do so and whether a relief is working. We heard …
Government response. 2.4 The Government agrees with the Committee’s recommendation. Target implementation date: December 2021 2.5 HMRC will publish data showing who is benefitting from pensions reliefs to the extent data is available. HMRC publishes annual statistics showing the total costs of …
HM Treasury
16
Conclusion
Twelfth Report: Management of tax relie…
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 …
Government response. 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 …
HM Treasury
17
Conclusion
Twelfth Report: Management of tax relie…
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 reliefs, which we noted was a cause for huge concern.30 …
Government response. 3.1 The Government agrees with the recommendation. Target implementation date: Autumn 2021 3.2 The government will explore the best way to collate and publish the objectives of non-structural tax reliefs, many of which have been in place for a long …
HM Treasury
18
Conclusion
Twelfth Report: Management of tax relie…
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 into three broad categories reflecting the broad type of outcome …
Government response. 3.1 The Government agrees with the recommendation. Target implementation date: Autumn 2021 3.2 The government will explore the best way to collate and publish the objectives of non-structural tax reliefs, many of which have been in place for a long …
HM Treasury
19
Conclusion
Twelfth Report: Management of tax relie…
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 gave the example of marriage allowance, which recognises marriage in …
Government response. 3.1 The Government agrees with the recommendation. Target implementation date: Autumn 2021 3.2 The government will explore the best way to collate and publish the objectives of non-structural tax reliefs, many of which have been in place for a long …
HM Treasury
20
Conclusion
Twelfth Report: Management of tax relie…
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 published for the first time a list of all 362 …
Government response. 5.1 The Government agrees with the recommendation. Target implementation date: December 2021 5.2 The government recognises the importance of transparency in providing information to inform the understanding of tax reliefs. HMRC includes links to external evaluations and research reports about …
HM Treasury
21
Conclusion
Twelfth Report: Management of tax relie…
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 well or that it is not being used as intended.39 …
Government response. 4.1 The Government agrees with the Committee’s recommendation. Target implementation date: Autumn 2020 4.2 HMRC’s annual official statistics on tax reliefs include graphs of the absolute costs of the most significant reliefs and their cost as a proportion of GDP, …
HM Treasury
22
Conclusion
Twelfth Report: Management of tax relie…
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 forecasts. For example, the research and development scheme for large …
Government response. 4.1 The Government agrees with the Committee’s recommendation. Target implementation date: Autumn 2020 4.2 HMRC’s annual official statistics on tax reliefs include graphs of the absolute costs of the most significant reliefs and their cost as a proportion of GDP, …
HM Treasury
23
Conclusion
Twelfth Report: Management of tax relie…
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 including shifts in science and technology, reliefs driving changes in …
Government response. 4.1 The Government agrees with the Committee’s recommendation. Target implementation date: Autumn 2020 4.2 HMRC’s annual official statistics on tax reliefs include graphs of the absolute costs of the most significant reliefs and their cost as a proportion of GDP, …
HM Treasury
24
Conclusion
Twelfth Report: Management of tax relie…
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 a tax relief might be different to what was expected …
Government response. 4: PAC conclusion: HMRC cannot explain why the cost of some tax reliefs is considerably greater than government forecasts presented to Parliament. 4: PAC recommendation: HMRC should, as part of its next annual statistical publication on tax reliefs due in …
HM Treasury
25
Conclusion
Twelfth Report: Management of tax relie…
In March 2015, we concluded that there was inadequate assessment of the value for money of tax reliefs.45 In 2017, HM Treasury began to make assessments of the value for money of tax reliefs and by 2019 had assessed the value for money of 63 tax reliefs.46 We asked HM …
Government response. 5: PAC conclusion: HMRC and HM Treasury do not publish sufficient information on the value for money of tax reliefs to enable Parliament to hold government to account. 5a: PAC recommendation: HMRC should ensure that the results of internal, as …
HM Treasury
26
Conclusion
Twelfth Report: Management of tax relie…
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 as it wanted to ensure that its response was appropriate, …
Government response. 6: PAC conclusion: 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. 6: PAC recommendation: HMRC and HM Treasury should, within 3 months, …
HM Treasury
27
Conclusion
Twelfth Report: Management of tax relie…
In 2015, HMRC published a qualitative evaluation of entrepreneurs’ relief but it only interviewed 17 claimants as part of the evaluation.52 In 2017, HMRC published a larger quantitative evaluation of entrepreneurs’ relief which included interviews with 625 claimants. The 2017 evaluation found that at the point they invested, only 8% …
Government response. 2.2 HMRC recognises the importance of publishing more information to aid understanding of the use of tax reliefs. HMRC already publishes statistics about groups and sectors benefitting from some major tax reliefs, such as the sectors and regions of claimants …
HM Treasury
28
Conclusion
Twelfth Report: Management of tax relie…
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 billion in 2014–15 to £2.2 billion in 2017–18. This increase …
Government response. 6.4 The departments take a range of steps in response to abuse, HMRC uses ‘spotlights’ on Gov.UK to warn of concerns about avoidance with regards to individual reliefs. On R&D specifically, HMRC has used funding provided by the November 2017 …
HM Treasury
29
Conclusion
Twelfth Report: Management of tax relie…
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, at the 2020 Budget the government announced that it would …
HM Treasury
30
Conclusion
Twelfth Report: Management of tax relie…
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 higher than expected number of claims for the relief and …
Government response. 6.4 The departments take a range of steps in response to abuse, HMRC uses ‘spotlights’ on Gov.UK to warn of concerns about avoidance with regards to individual reliefs. On R&D specifically, HMRC has used funding provided by the November 2017 …
HM Treasury