Hodge shocked over tax relief monitoring

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Public Accounts Committee (PAC) chair Margaret Hodge said it is “shocking” that HMRC has no systematic evaluation or monitoring of whether tax reliefs are working as intended.

Earlier this week members of the PAC took evidence from the Treasury’s Sir Nicholas MacPherson and HMRC chief executive Lin Homer on tax reliefs and how they are administered.

The Labour MP said: “the committee is all too aware of numerous instances where tax reliefs are exploited to avoid tax and not used to achieve the policy intent.”

Opening the hearing, Hodge asked how many tax expenditures there were, to which Homer said the OTS had looked at 159.

“There are 1,100 aren’t there?” Hodge replied. “I’m trying to use HMRC’s definition…why do you call them tax expenditure, why is it purist to do so?” she continued. “It isn’t a completely international definition.”

A recent NAO report identified...

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10th Apr 2014 09:33

Utter hypocrisy

MPs grilling others on why the laws those same MPs passed have loopholes you could drive a bus through. Not to mention slashing budgets and then querying why tax reliefs aren't getting policed properly (Here's a hint Margaret. Tax inspectors are not free). Unbelievable.

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By Locutus
10th Apr 2014 10:50

Huge exercise
It would be a huge exercise tracking all 1,129 reliefs, along with the "unintended consequences". It is almost an impossible task, as you would need to accurately model what would have happened had the relief not been available, to establish the effect of having that relief.

It just wouldn't be a good use of scarce HMRC resources.

It would be far better for Hodge to lobby her fellow MPs to simplify the tax system, which of course includes tax reliefs.

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Make it simple, save time, save money

Locutus wrote:
It would be far better for Hodge to lobby her fellow MPs to simplify the tax system, which of course includes tax reliefs.

I couldn't agree more.

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10th Apr 2014 16:00

The Treasury
Surely the Treasury comes up with most of the crackpot reliefs and they should therefore be the ones responsible for evaluating how much their rich friends have saved?

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10th Apr 2014 17:51

Job forthe PAC?

the_Poacher wrote:
Surely the Treasury comes up with most of the crackpot reliefs and they should therefore be the ones responsible for evaluating how much their rich friends have saved?

Couldn't agree more.  Surely it is the government's job to monitor whether its rules do what they are supposed to.  Perhaps a committee of MPs could do it - maybe a public accounts committee or something similar.

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10th Apr 2014 20:35

the solution has to include
A clear and concise guide to transfer and intellectual property pricing

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11th Apr 2014 11:08

Casablanca

Reminds me of the scene when the chief of police says "I am shocked — shocked— to find that gambling is going on in here!".

And then collects his winnings.

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11th Apr 2014 12:01

@stepurhan

Spot on ( as always!!) - especially when you consider that some of the laws used by multinationals which have been complained about were put into force when said chairperson of the PAC was in the Cabinet when they were put forward!!!

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By MDK45
11th Apr 2014 18:59

Hmrc don't match pension tax relief claimed against pension fund companies amounts claimed. Surely a chunk of this would be just matching individual utr's on two different spreadsheets to see they equal each other, a simple vlookup would do the trick. Any unmatchable items deserve further investigation, what am i missing here?

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11th Apr 2014 22:44

How can they?
Do hmrc get a listing from the pension companies showing payments received per year from each policyholder?

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By MDK45
12th Apr 2014 07:06

If they don't then they should. Aside from a few cut off issues then this surely would be a quick job. Lord knows how many errors there would be on peoples' submissions.

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By hiu612
14th Apr 2014 11:30

Not so sure

Isn't that the basic premise of how the paperless CIS system works (or should I say doesn't work). I don't think there would be anything cheap or simple about monitoring these reliefs, and agree with other posters that HMRC's job is implementation of the tax law, not monitoring take up and considering policy matters. That job falls to the politicians and civil servants responsible for writing the rules.

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By hiu612
14th Apr 2014 11:30

Not so sure

Isn't that the basic premise of how the paperless CIS system works (or should I say doesn't work). I don't think there would be anything cheap or simple about monitoring these reliefs, and agree with other posters that HMRC's job is implementation of the tax law, not monitoring take up and considering policy matters. That job falls to the politicians and civil servants responsible for writing the rules.

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By RobertG
28th Apr 2014 10:19

FILM TAX RELIEF

There will always be someone ready to try and abuse any tax relief system.  We are very much involved in claiming UK film tax relief on British films.  It is worth roughly 20% of the core production costs (pre, production and post production).  This is hugely important to use as either part of the film`s finance costs or to be used as part of the recoupment for investors.  On a lower budget film of say up to £150,000, coupling an SEIS (50% tax credit) and the UK film tax credit (20%) for investors the film would only need to make 30% to break even. It is a huge consideration for increasing film investment and increasing the number of films made.

There is a robust quality assurance check on UK films.  Firstly they have to be certified as such by the BFI which in certain cases requires an audit certificate from an independent auditor.  They get a copy of the completed film to see that something was made and is it in line with the budget.  Then the costs have to be presented to HMRC film unit which can scrutinise every aspect of the claim.

There are rogue `producers` (widely publicised) who have tried to make fraudulent claims who are now enjoying life behind bars.  We have worked on 30 films all of which have benefited from the UK film tax credit and it is bringing international films to the UK to be made as British.

When people play the game properly it is an excellent system as when films make money and distributions are made to cast and crew as part of their remuneration contract the tax credit can be claimed again on those disbursements.

Rob Graham

www.graham-assoc.co.uk

 

 

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