The National Audit Office (NAO) has called on HM Treasury and HMRC to establish clear arrangements for evaluating and reporting on the effectiveness of their management of non-structural tax reliefs, such as R&D tax credits and pensions tax relief (often referred to as ‘tax expenditures’). The cost of these reliefs amounts to some £155bn each year.
In its report, The management of tax expenditures, the NAO explains that while government spending is governed by HM Treasury’s Managing public money, there is no equivalent guidance for tax expenditures. The report acknowledges that both HMRC and HM Treasury have, in response to earlier NAO recommendations, increased their oversight of tax expenditures and are actively considering their value for money.
However, in a UK tax system with nearly 1,200 tax reliefs, the NAO says that ‘on their own these improvements will not be sufficient to address value-for-money concerns unless the departments formally establish their accountabilities for tax expenditures and enable greater transparency’.
John Cullinane, CIOT director of tax policy, welcomed the NAO recommendations, ‘which are similar to those expressed in our Better Budgets report which called for proper and systematic review of tax changes including the growth in tax reliefs’.
‘HMRC’s monitoring of tax reliefs is not yet systematic or proportionate to their value or the risks they carry’, Cullinane said. ‘We hope the public accounts committee, once it is up and running in this Parliament, will take up this important issue’, he added.
James Tetley, head of R&D at accounting and consulting firm RSM, commented that the report highlighted the need for the government to ‘champion’ R&D tax incentives. Although the NAO noted that R&D incentives for small and medium sized businesses are costing more than published forecasts and are subject to increased abuse, Tetley argued that ‘it is important not to lose sight of the fact that for the vast majority of beneficiaries of the scheme, it is a valued incentive that continues to be a significant stimulus for innovation by UK businesses’.
The National Audit Office (NAO) has called on HM Treasury and HMRC to establish clear arrangements for evaluating and reporting on the effectiveness of their management of non-structural tax reliefs, such as R&D tax credits and pensions tax relief (often referred to as ‘tax expenditures’). The cost of these reliefs amounts to some £155bn each year.
In its report, The management of tax expenditures, the NAO explains that while government spending is governed by HM Treasury’s Managing public money, there is no equivalent guidance for tax expenditures. The report acknowledges that both HMRC and HM Treasury have, in response to earlier NAO recommendations, increased their oversight of tax expenditures and are actively considering their value for money.
However, in a UK tax system with nearly 1,200 tax reliefs, the NAO says that ‘on their own these improvements will not be sufficient to address value-for-money concerns unless the departments formally establish their accountabilities for tax expenditures and enable greater transparency’.
John Cullinane, CIOT director of tax policy, welcomed the NAO recommendations, ‘which are similar to those expressed in our Better Budgets report which called for proper and systematic review of tax changes including the growth in tax reliefs’.
‘HMRC’s monitoring of tax reliefs is not yet systematic or proportionate to their value or the risks they carry’, Cullinane said. ‘We hope the public accounts committee, once it is up and running in this Parliament, will take up this important issue’, he added.
James Tetley, head of R&D at accounting and consulting firm RSM, commented that the report highlighted the need for the government to ‘champion’ R&D tax incentives. Although the NAO noted that R&D incentives for small and medium sized businesses are costing more than published forecasts and are subject to increased abuse, Tetley argued that ‘it is important not to lose sight of the fact that for the vast majority of beneficiaries of the scheme, it is a valued incentive that continues to be a significant stimulus for innovation by UK businesses’.
