Source · Select Committees · Public Accounts Committee
Recommendation 22
22
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 forecasts. For example, the research and development scheme for large companies cost £2 billion in 2017–18 against a forecast of £1 billion when it was introduced. In July 2019, OBR reported that the cost of tax reliefs was poorly understood. It found that HMRC could not offer explanations for large changes in the cost of the research and development reliefs or entrepreneurs’ relief.42
Government Response
Not Addressed
HM Government
Not Addressed
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, which allows for monitoring the cost trends over time and whether cost changes are proportionate to the size of the relief. In the 2020 statistics HMRC will expand commentary on the variance over time of the costs of these high priority non-structural tax reliefs. 4.3 HMRC also plans to publish more information on initial forecast estimates in the tax relief statistics, starting in October 2020. In the first instance, this will focus on high priority non-structural tax reliefs which have been announced since the introduction of the Office for Budget Responsibility (OBR). The NAO noted in their recent report on tax reliefs, that it is more difficult to compare the costs of established tax reliefs with published government forecasts because projections cover a maximum of five years. There may be cases where it is not feasible to make credible comparisons, due to differences in time periods covered by the original forecasts and difficulties factoring in other complexities such as economic changes and wider policy changes. In cases where it is not feasible to develop an approach to compare costs with forecasts for high priority non-structural tax reliefs, HMRC will explain why.