Directors at HMRC have defended their management of the 400 tax reliefs in the UK, despite admitting that they don’t know how much some of them cost.
A report by the National Audit Office (NAO) published in November last year said that HMRC doesn’t know the cost of some reliefs or hold enough data to work out if some reliefs are value for money.
MPs on the Public Accounts Committee weren’t impressed.
Last week, Margaret Hodge, chair of the committee said HMRC wasn’t being transparent enough considering that the cost of some tax reliefs has increased sharply.
According to the NAO report claims for share loss tax relief jumped from £385m to £1.2bn in 2006-2007 but HMRC was unaware of this surge until 2013.
Lin Homer, chief executive and permanent secretary at HMRC, said an increase in the cost of a tax relief didn’t necessarily mean it wasn’t being well managed. The increase could be due to things outside HMRC’s control such as changes in government policy, she said.
Jim Harra, HMRC’s director general of business tax, said HMRC was aware of the abuse of share loss relief when it happened and used new tax rules to counter it.
Perhaps the most heated and entertaining exchanges were between Revenue directors and Conservative MP and committee member Richard Bacon.
Bacon argued that tax and tax reliefs were different. Governments use tax to bring money in and forego it with tax relief, he said.
Harra said the distinction wasn’t that simple.
There seems to be little agreement about tax relief.
As Hodge noted, even HMRC and the Office of Tax Simplification have different definitions of it.
This article was courtesy of NickHuber’s post on accounting web.