Treasury Committee demands action on exploited tax reliefs
An investigation is needed into the cost of over a thousand tax reliefs which complicate the tax system and are open to abuse, the Treasury Committee says.
In a press release on 26 July, the committee said that while there are more than 1,180 tax reliefs in operation, just 365 have official costings. In a new report, the cross-party committee of MPs concluded that the tax system is too complex and the scrutiny of existing reliefs is inadequate. This has enabled the abuse of some tax reliefs, and in some cases, fraud.
The committee is calling on the government to undertake a comprehensive and systematic review of existing tax reliefs to look for opportunities for simplification and to monitor for abuse and fraud.
While the overall cost is unknown, HMRC analysis found that 105 of the 1,180 reliefs cost the public purse a total of £195 billion. The committee called on HMRC to publish costings for all reliefs from the 2025–2026 tax year onwards.
The MPs concluded that the disparity between scrutiny of tax reliefs compared to direct public expenditure is stark and recommend reliefs be reclassified as government spending. The government should consider how individual departments can take more responsibility for budgeting reliefs to increase ministerial accountability and oversight, the committee said.
The MPs also recommend that the government institutes five-yearly reviews of tax reliefs and removes reliefs which no longer achieve policy objectives, are vulnerable to abuse or cost significantly more than expected.
Commenting on the report, Harriett Baldwin MP, chair of the Treasury Committee, said:
“Our tax system is too complicated, and the proliferation of un-costed tax breaks add to that complexity. While some reliefs are very effective, others are prone to abuse or simply lie dormant, cluttering the ever-expanding tax code. The fact we only have costings for a third of reliefs is staggering – and something which needs rectifying with urgency.
“HMRC and the Treasury need to work hand in glove to get a grip on the complexity, lack of transparency and potential for abuse. We thank all those who gave evidence to our inquiry and look forward to receiving the Government’s response.”