HMRC criticised for investigation

The National Audit Office (NAO) has criticised HM Revenue and Customs (HRMC) for not properly investigating why a tax relief scheme cost more than expected.

It was estimated the entrepreneurs’ relief cost the Treasury a total of £2.9 billion in 2013 – significantly ahead of the £900 million initially predicted.

The NAO concluded the HMRC had not attempted to rule out possible abuse by those claiming the relief when it was designing and implementing the scheme.

A spokesman for HMRC said: “It is nonsense to suggest that our administration of tax reliefs loses money.”

He stressed that “we robustly monitor the implementation of reliefs, and identify and tackle abuse as a routine part of our compliance work”.

HMRC also stressed measures to oversee the delivery of tax reliefs were “highly effective”.

An investigation into ten different tax reliefs by the NAO revealed the flaws in the entrepreneurs’ relief. The scheme was introduced in 2008 and aimed to reduce the tax liabilities of small businesses.

The NAO concluded the HMRC had only conducted limited analysis of the cost of scheme over the first five years of its introduction and whether or not it was open to potential misuse.

In addition, the investigation also highlighted flaws in the share loss relief, which saw a 300 per cent rise in claims in 2006/2007, but was not discovered by HMRC until 2013.

Head of the NAO Amyas Morse said: “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.”

Find treasury jobs with Barclay Simpson, the leaders in treasury recruitment