Treasury Committee urges systematic review of tax reliefs to tackle complexity and abuse

The report criticises the government for introducing new reliefs, but failing to remove those that are ‘redundant’. This goes against the government’s aim to simplify the tax system, they argue.

Harriett Baldwin MP, Chair of the Treasury Committee, explained: “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. HMRC and the Treasury need to work hand in glove to get a grip on the complexity, lack of transparency and potential for abuse.”

CIOT, ATT and LITRG all contributed written evidence to the Committee.

During its inquiry, the Committee heard there are over 1,180 tax reliefs in operation, but just 365 have official costings.

The Committee has concluded that tax reliefs are ‘important factors in complexity’ of the tax system, and that the scrutiny of existing reliefs is inadequate.

Therefore, the Committee recommends that the government needs to undertake a “comprehensive and systematic review of existing tax reliefs to look for opportunities for simplification”. The Committee states that the government should institute five-yearly reviews for tax reliefs and eliminate those that “no longer achieve policy objectives, are vulnerable to abuse or have estimated costs significantly higher than expected”.

Additionally, the Committee offers the following recommendations to promote a simpler and more effective tax system that is also less disposed to fraud:

• HMRC needs to publish full costings of all tax reliefs from the 2025/26 tax year onwards
• Greater public consultation on new and existing tax reliefs, particularly around the potential abuse at both policy design and post-implementation monitoring phases
• Non-structural tax reliefs, those designed to promote certain behaviour, should be classed as public spending and scrutinised as such.

You can read the full report here.