HMRC clueless about cost of half of tax breaks

HMRC clueless about cost of half of tax breaks

HM Revenue & Customs (HMRC) doesn't know what is the cost to the government of more than half of the tax reliefs provided in the UK.

According to the Public Accounts committee 22-page long HMRC's performance 2017 to 2018 report, from the 424 tax reliefs provided, the taxman doesn't report a cost of 239 of these.

The report stated the lack of information on the cost of these tax breaks is because in the large majority of cases HMRC considers "the cost of collecting the data needed would be disproportionate".

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The Parliamentary committee argued that these gaps in HMRC's understanding of costs "means it cannot assess the value for money of many tax reliefs designed to deliver particular policy objectives".

It also limits the input the taxman "can make into HM Treasury's decisions on the design and scale of existing and new reliefs," the MPs added.

The committee is therefore recommending that HMRC should set out, by April 2019, an approach for improving its understanding of the cost for those tax reliefs where it does not already have that information.

FTAdviser reported in September that the taxman has no way of telling how much revenue came from the tapered annual allowance, money purchase annual allowance or standard annual allowance.

HMRC's total forecast of the costs of tax reliefs for 2017 to 2018 is £416.8bn, which according to its annual report is related 105 reliefs.

HMRC assesses a further 80 reliefs, which either have a nil or negligible cost.

For 179 of the remaining 239 reliefs, HMRC told the Public Accounts committee that information on the use of the relief is not required in tax returns, and the cost of collecting usage data would be disproportionate.

Where HMRC does not have cost data it can "make some estimates" or "do a one-off exercise" to collect some data.

However, HMRC stated the volume of reliefs means that it cannot undertake such exercises every year for every relief.

Meg Hillier, Labour and Co-op MP for Hackney South and Shoreditch, chairwoman of the committee, argued the taxman "lacks understanding of the costs of a vast swathe of tax reliefs, which means it cannot take an informed view on their value for money".

She said: "Our committee recognises the scale of the challenges facing HMRC and the time-critical nature of its Brexit work. But the authority must not lose sight of its wider responsibilities to UK taxpayers.

"There are practical steps HMRC can take to better safeguard public money and we encourage it to respond positively to our recommendations."