BDO responds to NAO report calling for greater scrutiny of tax reliefs

Commenting on today’s NAO report which recommends that HMT and HMRC make a step-change in how they assess whether tax reliefs achieve their economic objectives, Paul Falvey, tax partner at BDO said:

“In response to a Treasury Select Committee report last October which also called for greater scrutiny of tax reliefs, the Government’s response suggested that a full review of all tax reliefs would impose significant uncertainty on the tax system, put revenue at risk and alter business behaviour. It also argued that any regular time-based assessment of whether reliefs should continue to exist would create instability and uncertainty in the latter years of that cycle.

“The NAO report highlights instances in which some tax reliefs have overshot their budget by some margin with a significant knock-on impact for the public finances. However, taxpayers will want to be satisfied that this represents value for money in terms of additional investment, jobs and economic growth.

“Today’s report does further strengthen the case for greater evaluation of the UK’s non-structural tax reliefs. If current, or future, governments are serious about promoting economic growth, then more in-depth research into the cost and effectiveness of tax reliefs should be a higher priority that it currently is.”

Responding to the NAO’s recommendation that HMRC carries out compliance work on older R&D claims, Carrie Rutland, Innovation Incentives partner at BDO said:

“We are already seeing auditors raise concerns over R&D claim figures in company accounts and if HMRC does respond to this latest NAO criticism by investigating more old claims it will inevitably make audits and due diligence exercises increasingly difficult for innovative companies. It’s worth noting that HMRC can go back four years if reasonable care was taken, six years in instances of carelessness and up to 20 years if fraud is suspected.

“Affected businesses are advised to get their past claims validated by experts or to put right any mistakes before HMRC comes calling.”

ENDS

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Frank Shepherd
Email: frank.x.shepherd@bdo.co.uk
Tel: 07812 463601