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Exploring the role of tax reliefs

Investment in infrastructure and innovation to support growth were two key features within the Spring Budget. Lindsey Wicks examines the role that tax reliefs play in delivering the government’s goals, including going into detail about simple and certain reliefs.

The National Audit Office (NAO) is on the case of HM Treasury and HMRC to properly monitor the costs of non-structural reliefs and assess their full economic impact (The management of tax expenditures, 14 February 2020). This report has led to an inquiry being opened by the Public Accounts Committee on 27 May. The annual investment allowance (AIA) and the R&D tax relief schemes are the main non-structural tax reliefs to support investment in infrastructure and innovation.

In terms of answering the NAO’s concerns, HMRC reports some statistical data about the costs of these reliefs, but that’s different to examining their impact. Where a relief is available, HMRC plays both Dr Jekyll and Mr Hyde: it has a role in promoting the relief to encourage expenditure, but then also scrutinises claims to detect avoidance. Do tax reliefs have a place in influencing spending habits?