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Spending watchdog hammers Treasury for losing track of tax relief

The National Audit Office has slammed the Treasury and HMRC for “not keeping track” of who uses different tax reliefs and its effectiveness.

In a scathing NAO report, published today, the Treasury is accused of failing monitor the costs and benefits of tax reliefs and whether they are changing behaviour.

The NAO says HMRC did not check “large-scale abuse” of share loss relief in 2006 or follow up where there were other unexplained surges.

HMRC has also failed to carry out check on possible abuse of entrepreneurs relief, despite the cost outstripping forecasts since 2010.

Separately, MPs have questioned the Treasury over new pensions freedoms opening up a loophole to allow someone aged 55 or over to use pension contributions to avoid income tax alongside employee and employer national insurance.

The new freedoms have sparked debate among policymakers about whether pensions tax relief needs wholesale reform in the next parliament.

NAO head Anyas Morse says: “HM Treasury and HMRC do not keep track of tax reliefs intended to change behaviour, or adequately report to Parliament or the public on whether tax reliefs are expensive or work as expected.

“We found some examples where HMRC and HM Treasury proactively monitored and evaluated tax reliefs, but in general the Departments do not test whether their aims for the reliefs are being achieved. Until they monitor the use and impact of tax reliefs, and act promptly to analyse increases in their costs, HMRC and the Treasury’s administration of tax reliefs cannot be value for money.”

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