The Treasury Committee today calls for a systematic review into
the cost of over a thousand tax reliefs which complicate the tax
system and are open to abuse.
Tax reliefs reduce the amount of tax an individual or company
pays when they meet certain conditions. Some, such as relief for
businesses investing in research and development or tax credits
for firms developing video games, are designed to promote
particular activities. Others, such as the personal allowance
someone receives before paying income tax, are structural aspects
of the tax system.
During its inquiry,
the Committee heard there are over 1,180 tax reliefs in
operation, but just 365 have official costings.
In a new report, the cross-party Committee of MPs concludes that
the tax system is too complex and the scrutiny of existing
reliefs is inadequate. This has contributed to the abuse of some
tax reliefs, and in certain cases, fraud.
The Committee calls on the Government to undertake a
comprehensive and systematic review of existing tax reliefs to
look for opportunities for simplification and to monitor for
abuse and fraud.
While the overall cost is unknown, HM Revenue & Customs
(HMRC) analysis found that 105 of the 1,180 reliefs cost the
public purse a total of £195 billion. The Committee calls on HMRC
to publish costings for all reliefs from the 2025 – 2026 tax year
onwards.
The MPs conclude that the disparity between scrutiny of tax
reliefs compared to direct public expenditure is stark and
recommend reliefs be reclassified as Government spending. The
Government should consider how individual departments can take
more responsibility for budgeting reliefs to increase Ministerial
accountability and oversight.
The MPs also recommend the Government institutes five-yearly
reviews of tax reliefs and removes reliefs which no longer
achieve policy objectives, are vulnerable to abuse or cost
significantly more than expected.
Commenting on the report, , Chair of the Treasury
Committee, said:
“Our tax system is too complicated, and the proliferation of
un-costed tax breaks add to that complexity. While some reliefs
are very effective, others are prone to abuse or simply lie
dormant, cluttering the ever-expanding tax code. The fact we only
have costings for a third of reliefs is staggering – and
something which needs rectifying with urgency.
“HMRC and the Treasury need to work hand in glove to get a grip
on the complexity, lack of transparency and potential for abuse.
We thank all those who gave evidence to our inquiry and look
forward to receiving the Government’s response.”
-Ends-
Notes to editors:
- Details of the Committee’s inquiry, written evidence
submissions and oral evidence replay links and transcripts can
be found here.
- The Committee’s report on Tax Simplification, which called
for enhanced accountability of Government efforts to simplify the
UK’s overcomplicated and burdensome tax system, can
be read in full here.
