TaxCorporate TaxNAO: Treasury and HMRC ‘lack framework’ for tax reliefs

NAO: Treasury and HMRC ‘lack framework’ for tax reliefs

NAO finds Treasury and HMRC do not adequately monitor effectiveness of tax reliefs

NAO: Treasury and HMRC ‘lack framework’ for tax reliefs

HM TREASURY AND HM REVENUE & CUSTOMS have failed to establish a framework or principles to adequately guide the administration of tax reliefs, according to a report from the National Audit Office.

The Exchequer department does not believe reliefs have administrative implications that differentiate them from other parts of the tax system, and defending the position that they do is proving costly to the public purse, the NAO said.

Some are structural parts of the tax system, or to ensure the correct calculation of profits. Other reliefs, sometimes described as ‘tax expenditures’, are designed to encourage a particular behaviour towards a social or economic policy objective.

But today’s report shows that the NAO has found the Treasury and HMRC have failed to identify which tax reliefs are intended to change behaviour in order to deliver targeted policy objectives. Moreover, they do not monitor or report on the costs and benefits of the reliefs, and as such the government and public at large cannot hold them to account.

HMRC detected large-scale abuse of share loss relief in 2006/07 but did not check the total amount of claims in 2006/07 or subsequent years to check whether there were other unexplained surges. In 2006/07, the cost of claims against income tax for share loss relief rose from £385m to £1.3bn in real terms. HMRC is investigating 80% of the 2006/07 claims by value (£964m).

HMRC has carried out only limited analysis to investigate why the cost of entrepreneurs’ relief has significantly outstripped its forecast, increasing over 500% from £500m in 2008/09, to an estimated £2.9bn in 2013/14 and whether the cost increase might be influenced by misuse of the relief.

Head of the NAO Amyas Morse said: “HM Treasury and HMRC do not keep track of tax reliefs intended to change behaviour, or adequately report to Parliament or the public on whether tax reliefs are expensive or work as expected.

“We found some examples where HMRC and HM Treasury proactively monitored and evaluated tax reliefs, but in general the Departments do not test whether their aims for the reliefs are being achieved. Until they monitor the use and impact of tax reliefs, and act promptly to analyse increases in their costs, HMRC and the Treasury’s administration of tax reliefs cannot be value for money.”

Related Articles

‘Google tax’ nets HMRC £281m

Corporate Tax ‘Google tax’ nets HMRC £281m

1m Emma Smith, Managing Editor
OTS report: Corporation tax should follow accounts

Corporate Tax OTS report: Corporation tax should follow accounts

3m Alia Shoaib, Reporter
HMRC tax evasion assistance requests double in five years

Corporate Tax HMRC tax evasion assistance requests double in five years

4m Emma Smith, Managing Editor
HMRC nets £2.6bn in corporate tax from big businesses

Corporate Tax HMRC nets £2.6bn in corporate tax from big businesses

9m Accountancy Age editorial
Tax crackdown brings in £468m for HMRC

Corporate Tax Tax crackdown brings in £468m for HMRC

9m Accountancy Age editorial
Q&A with the Financial Secretary to the Treasury

Corporate Tax Q&A with the Financial Secretary to the Treasury

4m Emma Smith, Managing Editor
Spring Budget 2017: Making Tax Digital

Business Regulation Spring Budget 2017: Making Tax Digital

8m Shereen Ali, Deputy Editor
Tax fraud loses HMRC £16bn

Corporate Tax Tax fraud loses HMRC £16bn

8m Emma Smith, Managing Editor