Full review of tax reliefs would impose uncertainty, says FST

In the summer, a Treasury Committee report concluded that a “comprehensive and systematic” review of all tax reliefs is needed to identify opportunities for simplification. 

Responding to that report, the Financial Secretary to the Treasury (FST), Victoria Atkins, states that the government recognises the concerns raised. The government agrees with the focus on simplification of the tax system, limiting abuse and ensuring tax reliefs continue to achieve their policy goals. However, it considers that ongoing activity already delivers the majority of the committee’s desired outcomes. 

The FST notes: 

• A full review of all tax reliefs or constant reviews of reliefs would impose significant uncertainty on the tax system, putting revenue at risk and altering business behaviour while waiting for a review to conclude.
• Costing all tax reliefs is not possible without collecting significant additional data from taxpayers. In some cases, the relief is designed to remove taxpayers from the system.
• Classification of tax reliefs as government expenditure or a reduction in tax revenue is the responsibility of the Office for National Statistics rather than HM Treasury.
• Sunset clauses create inherent instability and uncertainty in the latter years of the cycle for all taxpayers claiming or considering claiming a relief. 

On simplification, the response notes: 

“While simplification is one of the government’s key objectives, it needs to be balanced against other important objectives of tax reliefs, such as supporting growth and employment.” 

Frank Haskew commented: 

“The government response is not unsurprising. With the number of tax reliefs now standing at 1,180 and the number apparently growing year on year, the task would be a considerable one in terms of resources and would take many years to complete. Perhaps the government should look to undertake a more focused review of specific reliefs, while at the same time considering carefully that there is a compelling case for any proposed new reliefs.  

“Above all, businesses want certainty so that they can plan. So there is a balance to be struck between a simpler tax system and the need for certainty, so as to ensure the UK remains an attractive location to live, work and invest.”  

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