Tax Reliefs – Report Summary

Summary

Our tax system is too complicated.

Tax reliefs reduce the amount of tax payable by a person or company if they meet certain conditions. There are over 1,000 tax reliefs in force in the UK tax system. These reliefs reduce tax revenues significantly, but less than half have official published costings. Ongoing scrutiny of their effectiveness is inadequate.

Tax reliefs make the system more complex for taxpayers and open up opportunities for abuse. Governments tend to introduce new reliefs, but rarely remove those which are redundant, making these problems progressively worse. This works against the Government’s stated aim, which we support, of simplifying the tax system.

To promote a simpler, better value and more effective tax system which is less prone to abuse we recommend:

• a comprehensive and systematic review of existing tax reliefs to look for opportunities for simplification,
• HM Revenue and Customs publish full costings of all tax reliefs,
• greater public consultation on new and existing tax reliefs,
• non-structural tax reliefs, those designed to promote certain behaviour, should be classed as public spending and scrutinised as such, and
• the Government should 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.