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NAO publishes findings on HMRC's monitoring of effectiveness of tax reliefs

February 12 2024

The National Audit Office (NAO) has published recommendations on how HMRC monitors the effectiveness of tax reliefs.

In a recent report, the NAO stated that HM Treasury and HMRC 'still do not monitor or evaluate reliefs closely enough to understand if they cost too much or achieve their intended economic impacts'.

The NAO said that, as at December 2023, there were 341 'non-structural' tax reliefs that were designed to achieve social or economic objectives. In the 2022/23 tax year, the total cost of 104 non-structural tax reliefs was around £204 billion.

It said that the largest non-structural reliefs, which include tax reliefs for pensions, capital gains tax (CGT) tax relief on main homes and zero-rated VAT on food, do not specifically target economic growth.

According to the NAO, it has taken 'a number of years' for the government to amend reliefs where analyses found that they were of limited effectiveness.

Commenting on the findings, Gareth Davies, Head of the NAO, said: 'Tax reliefs are an important policy tool for government, but their number and cost makes administration a significant task.

'The government should carry out sufficient evaluation and compliance work to understand whether claims are legitimate and reliefs are working, and act promptly to get reliefs back on track if problems are identified.'

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