Tax relief schemes ‘losing billions’ for Treasury claims Whitehall watchdog
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Version 0 of 1. Billions of pounds owed in tax may never be recovered because the government is failing to track abuse of official relief schemes, according to Whitehall’s official spending watchdog. In a report released on Friday, HM Revenue & Customs management of nearly 400 tax relief schemes has been criticised as inadequate by the National Audit Office. Margaret Hodge, chair of the public accounts committee, said it was “beyond belief” that tax officials were not monitoring reliefs more closely. Tax officials had failed to question why entrepreneurs’ relief has cost the Treasury £2bn a year more than expected, the auditors concluded. Officials had also overlooked a 300% rise in use of share-loss relief in 2007 to £1.2 bn, despite tough anti avoidance schemes. This apparent abuse continued for another six years, the report said. The release of the report prompted a robust defence from HMRC, which has said it was “nonsense” to suggest its administration of tax reliefs lost money. The Tories and Labour have this week released policies to clamp down on tax avoidance as the issue rises up the political agenda. Hodge said: “HMRC [says] it ensures taxpayers comply with tax rules by examining how individuals and companies pay tax, and does not need to monitor how reliefs themselves are used. “This approach means that HMRC might respond too slowly to changes in how tax reliefs are used, leaving the door open for tax avoidance.” Tax relief schemes cover government issues such as welfare, housing, business, food, education, health and transport. Critics have claimed the schemes can make the tax system more complex, less transparent, and pose risks to the Exchequer because costs can rise unabated. The NAO examined 10 tax breaks in detail to see whether the government was monitoring properly. It found data was not always held on the cost to the public purse of reliefs, even when thought to be in the order of hundreds of millions of pounds. In the case of entrepreneurs’ relief, which was introduced in 2008 by Alistair Darling to allow investors to pay just 10% on their first £1m investment instead of 18%, auditors found it cost £2.9bn last year rather than the forecast £900m. HMRC lists nearly 400 tax relief schemes on its website. A spokesman said: “It is nonsense to suggest our administration of tax reliefs loses money. We robustly monitor the implementation of reliefs, and identify and tackle abuse as a routine part of our compliance work.” |