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The Government has rejected the Treasury committee’s call for a review of all current tax reliefs to simplify the tax system.
The Committee report stated that a review of tax reliefs was also necessary to ensure any areas vulnerable to abuse are identified whilst improving scrutiny on how tax reliefs impact the public.
During its inquiry, the Committee heard that only 365 out of a total of more than 1,180 forms of active tax reliefs have been officially costed by HMRC. Cross-party MPs recommended that HMRC publish costings for all tax reliefs from the 2025/26 financial year onwards.
Furthermore, the Committee found that tax reliefs costs are not scrutinised in the same way as Government spending. It was recommended that reliefs are reclassified in such a way as to track their cost in the same way as other spending decisions.
Lastly, the report recommended the Government to conduct five-year reviews of individual tax reliefs and commit to remove those reliefs that no longer serve their policy goal or are vulnerable to abuse.
In its response, the Government indicated its agreement with the concerns raised by the Committee but asserted its view that carrying out the proposed work would not be the best use of resources. The Government also felt a number of the recommendations were already delivered by existing processes, such as the increase in recent years of HMRC tax relief evaluations.
In addition, the Government said that constant reviews would “essentially be creating uncertainty for taxpayers”, that costing all tax reliefs is not possible without collecting significant additional data from taxpayers which would put “considerable further administrative burdens on them”, and that classification of tax reliefs as government expenditure is “not within HMT’s control” but it’s a responsibility of the ONS.
Commenting on the Government response, Harriett Baldwin MP, chair of the Treasury Committee, said: “Our tax system is too complicated. It is disheartening to learn that the taxman has no plans to even measure the cost of benefit of hundreds of different tax reliefs – something that would help Ministers simplify the tax system and target growth.”
