NAO finds tax reliefs cost UK £155 billion per year

Research carried out by the National Audit Office (NAO) has found that UK tax reliefs cost £155 billion per year.

The NAO identified 362 ‘tax expenditures’. It classes these expenditures as tax reliefs that ‘support government economic and social objectives’.

According to the NAO, HMRC only costed 111 tax expenditures. These had a combined cost of £155 billion in 2018/19.

The research also revealed that 23 tax expenditures cost more than £1 billion in 2018/19. These 23 tax reliefs represented 92% of the total forecast cost in 2018/19.

In July 2019, the Office for Budget Responsibility (OBR) identified the costs of tax reliefs as one of four new ‘fiscal risks’ to public finances. Specifically, the OBR warned that the government did not know the full cost of tax reliefs; that tax reliefs lacked transparency and scrutiny; and that they add complexity to the UK tax system.

Alongside the Public Accounts Committee (PAC), the NAO raised concerns about HMRC’s management of tax reliefs, including whether they deliver value for money.

HMRC plans to estimate the costs of more tax expenditures between 2020 and 2022.