Source · Select Committees · Public Accounts Committee
Recommendation 26
26
In our June 2014 report on tax reliefs we concluded that the exchequer departments did...
Conclusion
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, but that this increased the amount of public money at risk.50 In March 2015 we questioned whether entrepreneurs’ relief was value for money given it was costing £2 billion more than forecast. HMRC told us that the cost variation was due in large part to changes in the scope of the relief. It told us that it had no evidence to suggest that there was systematic abuse of entrepreneurs’ relief and no evidence to suggest that Parliament’s intentions were not being achieved.51
Government Response
Not Addressed
HM Government
Not Addressed
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, write to the Committee to explain how they will accelerate their response when reliefs are costing much more than expected, are subject to abuse, or are not achieving their objectives. 6.1 The Government agrees with this recommendation. Target implementation date: Autumn 2020 6.2 The government agrees that it is important to quickly identify when and why reliefs deviate from their expected impact. The government already keeps tax reliefs under review and takes action where appropriate – for instance in the recent changes to Entrepreneurs’ Relief, now Business Asset Disposal Relief – and there are changes to reliefs in most Finance Bills. 6.3 Tax changes are considered at fiscal events where Ministers take decisions on priority actions required in the tax system and bring these forward to Parliament to consider. As part of this process, officials already provide Ministers with an overview of cost and effectiveness across reliefs and identify areas where there is a case for action. Going forward, HM Treasury and HMRC will provide more detailed advice to Ministers on cost trends of tax reliefs, alongside the annual tax relief cost publication. 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 Budget to increase the number of compliance staff in its R&D team by 100 full time equivalent (FTE). From 1 April 2019 returns which make or amend a claim for R&D relief must be made in a CT600 accompanied by a tax computation. HMRC meets with its Research and Development Consultative Committee approximately twice a year, which provides opportunities to communicate with stakeholders, and also to work together with them on problematic issues. 6.5 HM Treasury and HMRC are committed to providing timely, high quality advice to Ministers on the tax system, in line with the objectives of Ministers and the Department. HM Treasury and HMRC have committed to set and publish criteria for evaluating tax reliefs and consider indicators for increasing understanding of the value of tax reliefs, both of which will support future Ministerial advice.