The Public Accounts Committee (PAC) has published a report on the Management of tax reliefs, making a number of recommendations which, if accepted, would require HMRC and the Treasury to evaluate and report on the cost and effectiveness of UK tax reliefs.
The report notes a number of concerns, including:
the full cost of tax reliefs is not known and could exceed £159bn a year;
HMRC cannot explain why the cost of some tax reliefs is higher than government forecasts;
it is not clear whether tax reliefs achieve the economic and social objectives they are intended to support or whether they are cost-effective; and
government departments have been too slow to improve the management of tax reliefs.
Among the Committee’s recommendations are a number of suggested actions for HMRC and the Treasury, including the following:
HMRC and the Treasury should improve their reporting on the cost, beneficiaries and impact of reliefs in order to give Parliament the information it needs to scrutinise the value for money of the various schemes;
HMRC should focus on the largest and riskiest tax reliefs, particularly given the economic pressures related to coronavirus; and
from 2021, the Treasury should prepare annual reports setting out the results of its value for money assessments of tax reliefs.
The Low Incomes Tax Reform Group (LITRG) has noted PAC’s concerns around the availability of tax relief on pension contributions for workers earning below the income tax personal allowance (£12,500). Many auto-enrolment pension schemes operate on a net pay arrangement basis (rather than relief at source) meaning that contributions are taken directly from members’ wages with nothing contributed back to the scheme by HMRC. This has resulted in an estimated 1.75m workers (with women disproportionately affected) losing out on the ‘tax relief’ that otherwise would have boosted their pension fund.
The Public Accounts Committee (PAC) has published a report on the Management of tax reliefs, making a number of recommendations which, if accepted, would require HMRC and the Treasury to evaluate and report on the cost and effectiveness of UK tax reliefs.
The report notes a number of concerns, including:
the full cost of tax reliefs is not known and could exceed £159bn a year;
HMRC cannot explain why the cost of some tax reliefs is higher than government forecasts;
it is not clear whether tax reliefs achieve the economic and social objectives they are intended to support or whether they are cost-effective; and
government departments have been too slow to improve the management of tax reliefs.
Among the Committee’s recommendations are a number of suggested actions for HMRC and the Treasury, including the following:
HMRC and the Treasury should improve their reporting on the cost, beneficiaries and impact of reliefs in order to give Parliament the information it needs to scrutinise the value for money of the various schemes;
HMRC should focus on the largest and riskiest tax reliefs, particularly given the economic pressures related to coronavirus; and
from 2021, the Treasury should prepare annual reports setting out the results of its value for money assessments of tax reliefs.
The Low Incomes Tax Reform Group (LITRG) has noted PAC’s concerns around the availability of tax relief on pension contributions for workers earning below the income tax personal allowance (£12,500). Many auto-enrolment pension schemes operate on a net pay arrangement basis (rather than relief at source) meaning that contributions are taken directly from members’ wages with nothing contributed back to the scheme by HMRC. This has resulted in an estimated 1.75m workers (with women disproportionately affected) losing out on the ‘tax relief’ that otherwise would have boosted their pension fund.
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