Tax reliefs - statement from Chair of Public Accounts Committee

Parliament regularly introduces tax reliefs to achieve a particular outcome. However the Public Accounts Committee is all too aware of numerous instances where tax reliefs are exploited to avoid tax and not used to achieve the policy intent - whether it’s Gift Aid, film tax reliefs or the Patent Box tax relief supposed to encourage innovation.

There are at least 1,128 tax reliefs - those with similar aims to spending programmes are worth over £100 billion each year - and the number continues to grow. Despite good intentions, every one of these reliefs is an opportunity for abuse or fraud. 6 of the 19 types of tax avoidance schemes that HMRC specifically warns people not to use exploit tax reliefs.

It is shocking that HMRC knows this and yet there is still no systematic evaluation or monitoring of whether reliefs are working as intended.

There are signs that HMRC is getting better at tackling abuse where it is detected, but the absence of timely data means it remains on the back foot. Investigations are still taking too long, allowing those who benefit from tax avoidance schemes to string them out for longer.

HMRC and the Treasury need a much tighter grip on the use of reliefs in the tax system and I look forward to discussing this with the two departments when they appear before my Committee on 7 April.

Relevant information

• National Audit Office report: Tax reliefs