Tax relief statistics additional cost estimates (May 2022)
Updated 3 August 2022
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This publication is available at https://www.gov.uk/government/statistics/main-tax-expenditures-and-structural-reliefs/tax-relief-statistics-additional-cost-estimates-may-2022
Coverage: United Kingdom
Theme: The Economy
Release: 27 May 2022
Next Release: Autumn 2022
Frequency of Release: Bi-annual
Media Contact: news.desk@hmrc.gov.uk
Statistical Contact: A Wilby, taxreliefsstatistics@hmrc.gov.uk
Website: https://www.gov.uk/government/statistics/main-tax-expenditures-and-structural-reliefs
1. About this publication
This publication sets out new information on the costs of tax reliefs where the cost had previously been unavailable. It provides single-year static cost estimates for 15 non-structural tax reliefs and notes 4 reliefs where there is insufficient data to provide estimates.
These reliefs are listed in the download table accompanying this bulletin.
1.1 Structural and non-structural tax reliefs
Many tax reliefs are integral parts of the tax system - like the income tax personal allowance. These reliefs have various purposes, such as to define the scope of the tax or calculate income or profits correctly. These are classified as ‘structural tax reliefs’.
Other reliefs are actively designed to help or encourage particular types of individuals, activities or products in order to achieve economic or social objectives. These are classified as ‘non-structural’ tax reliefs.
The split between ‘structural tax reliefs’ and ‘non-structural tax reliefs’ is not always straightforward, and these categorisations remain under continuous review. Many reliefs have both structural and non-structural purposes. For example, capital allowances can provide relief for commercial depreciation as well as an element of accelerated relief. While the former can be regarded as a structural part of the tax system, the latter is non-structural as it provides additional benefit to business.
Where reliefs combine both structural and non-structural elements, they have been allocated to the category deemed most dominant.
The previous release from December 2021 included:
- multi-year cost estimates for structural reliefs
- multi and single-year cost estimates for non-structural reliefs (including all cost estimates for previously uncosted reliefs published up to December 2021)
- lists of tax reliefs where cost estimates are unavailable for:
- distributional analysis for Entrepeneurs’ Relief (now Business Assets Disposal Relief) and Pension Tax Relief
The multi-year cost estimates provide costs from outturn years 2016 to 2017 up to 2020 to 2021 and forecasts for the tax year 2021 to 2022. Single-year cost estimates are given for the latest year that data was available when the costing was undertaken.
2. Progress against Public Accounts Committee (PAC) recommendations
These new cost estimates are the latest from an HMRC project to increase transparency on the cost of non-structural tax reliefs and deliver commitments made to PAC in HMRC’s letter of 30 April 2019. New cost estimates for non-structural reliefs were produced as follows:
- 17 new cost estimates were published in the Tax relief statistics publication in December 2021
- 29 were published in the May 2021 release of this publication
- 26 were published alongside the original annual Tax relief statistics publication in October 2020
- 47 were published in the May 2020 release of this publication
2.1 Progress on costing previously uncosted reliefs since 2019
| Outcome | May 2020 | October 2020 | May 2021 | December 2021 | May 2022 | Total |
|---|---|---|---|---|---|---|
| Cost estimate published | 46 | 26 | 29 | 17 | 15 | 133 |
| Cost estimate withheld due to dominance and disclosure rules | 0 | 11 | 12 | 2 | 0 | 25 |
| Unable to estimate cost | 2 | 3 | 4 | 5 | 4 | 18 |
| Total | 48 | 40 | 45 | 24 | 19 | 176 |
There are currently 339 non-structural tax reliefs and, at the start of this project, around 240 non-structural reliefs had no cost information available. Since 2019, including this publication, we have published:
- new cost estimates for 133 of these reliefs
- established that the cost of 25 reliefs cannot be published because of statistical rules including those around disclosure
- found that for 18 reliefs we do not have sufficient data to estimate the cost
There are now 60 uncosted non-structural reliefs remaining.
3. Interpretation of estimates
How to interpret these figures:
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these figures are estimates of the amount of relief which is claimed and subsequently granted each year
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these estimates do not represent the gain to the exchequer should a relief be abolished
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these estimates do not account for interactions between reliefs
- estimates should not be summed, as the use of a given relief can be highly dependent on the use of another
- there are also wider economic impacts if reliefs were removed, which would not be accounted for in the sum of the costs of reliefs
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the estimates are in nominal £ million
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cost estimates are provided for the latest year that data was available when the costing was undertaken
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estimates should not be compared publication to publication as changes to policy, modelling methodologies, data, and assumptions mean that estimates could be calculated on a different basis year to year
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please refer to the supplementary notes on the tables for additional explanations for specific reliefs
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the uncertainty rating provided should be considered when using these estimates
- all costs are on an accruals basis, ie they represent the effects on the tax liabilities for each year, not receipts in each year
The estimates are static cost estimates, which means that they do not allow for behavioural responses which could result from changes to the reliefs.
In practice, if a relief was withdrawn, taxpayers’ behaviour would often change so the additional tax collected from withdrawing a relief could be very different from the estimate shown. For example, taxpayers may have a choice of which reliefs to claim, and if one were removed, they could claim the other.
These figures should be regarded as broad estimates, as the loss of revenue from a tax relief cannot be directly observed so the estimates are often based on assumptions. Some tax reliefs are used by a small number of taxpayers. For these reliefs, publishing a cost estimate could possibly individual taxpayers to be identified - in these cases we do not report the cost.
This publication has the experimental statistics label, which highlights that the statistics are newly developed and the publication is undergoing evaluation. Due to data limitations, cost estimates in this publication have a higher average degree of uncertainty than in the other statistical publications in the HMRC Tax Relief Statistics collection. As a result, each estimate has been given an uncertainty rating. More information on experimental statistics from the Office for Statistics Regulation can be found in Experimental statistics – official statistics in development.
4. Results
4.1 Single-year cost estimates (figures given in £ millions):
| Name | Tax type | Year | Cost estimate | Uncertainty rating |
|---|---|---|---|---|
| Long term assets | Petroleum Revenue Tax | Not applicable | Unable to estimate cost | NA |
| Relief from excise duty on antiques , prizes etc | Excise Duty | 2019 to 2020 | Negligible | Low |
| Property authorised investment (PAIF) funds and co-ownership authorised contractual schemes (CoACS) (seeding relief) | Stamp Duty Land Tax | 2020 to 2021 | Negligible | High |
| Compensation paid to victims of persecution during the World War II era | Inheritance Tax | 2021 to 2022 | Negligible | Low |
| Seed Enterprise Investment Scheme (SEIS) - reinvestment relief | Capital Gains Tax | 2019 to 2020 | 5 | Low |
| Social Investment Tax Relief (SITR) - deferral relief | Capital Gains Tax | 2019 to 2020 | Negligible | High |
| Overseas Workday Relief | Income Tax | 2018 to 2019 | 210 | Low |
| Termination of employment - payments and benefits provided by foreign governments etc. | Income Tax | Not applicable | Unable to estimate cost | NA |
| Consular employees of foreign states - benefits | Income Tax | 2021 to 2022 | Negligible | Medium |
| Employment related securities for disabled employees | Income Tax | 2020 to 2021 | Negligible | Low |
| Disabled person’s vehicle maintenance grant | Income Tax | 2021 to 2022 | Negligible | Medium |
| Interest on damages for personal injury | Income Tax | 2019 to 2020 | 10 | Medium |
| Medical treatment | Income Tax | 2018 to 2019 | 20 | Medium |
| Transfer of assets abroad - exemption from charge | Income Tax | Not applicable | Unable to estimate cost | NA |
| Compensation awards for personal injury | Income Tax | 2019 to 2020 | 1300 | Medium |
| Exemptions relating to emergency vehicles | Income Tax | 2020 to 2021 | 5 | Medium |
| Export finance related insurance | Insurance Premium Tax | Not applicable | Unable to estimate cost | NA |
| Compensation paid to victims of persecution during the World War II era | Capital Gains Tax and company gains within Corporation Tax | 2020 to 2021 | Negligible | Low |
| Capital allowances - 100% first-year allowance for zero-emission goods vehicles | Income Tax and Corporation Tax | 2019 to 2020 | 10 | Medium |
The associated download table published with this bulletin also provides additional information on each relief. Reliefs that apply to more than one tax will be listed in the ‘Multiple tax types’ tab of the download.
4.2 Homeworkers allowance
Employers can make tax free payments for the additional household costs incurred by employees who work at home under homeworking arrangements. Where an employer does not reimburse these costs, providing certain conditions are met, employees can claim tax relief on a flat rate allowance of £6 per week or on the actual costs incurred where evidence is provided. The circumstances under which a tax free payment can be made by the employer are less restrictive than the conditions that need to be met where the employee claims tax relief.
The costs have increased in recent years due to the pandemic and mandated working from home which has resulted in an increased number of claims. There was also an operational easement to allow annual claims.
Cost:
| Tax year | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|---|
| Estimated tax relief (£ million) | Negligible | Negligible | Negligible | 270 | 150 |
This relief has a low uncertainty rating.
5. Methodology and data quality
For many reliefs, HMRC does not require information on the use of the relief to be submitted on tax returns as this is not needed for establishing the liability to tax. This may be because the relief is an exemption rather than a deduction from income or profits. In such cases, HMRC uses suitable external information sources, if available, to estimate its cost.
The reliefs in this publication were previously uncosted, which in many cases was due to data limitations. Since there is no administrative data readily available we have used suitable publicly available external data, or data from other government departments where possible.
Where we have used external data, the available data is not always targeted or comprehensive. In many cases, relevant data is not directly available and we have had to rely on proxy data and/or assumptions. We have therefore provided an uncertainty rating with each cost estimate. Our assessment of the uncertainty level is broad-based and considers the quality of data used and the assumptions made:
| Uncertainty | Data and modelling approach |
|---|---|
| Low | High quality, targeted and comprehensive data from administrative or external sources. Assumptions have strong underlying rationale and can be verified using good quality independent data. |
| Medium | Basic data, incomplete in a few instances, which may be from external sources. Some assumptions are used and can be verified only to a limited extent. |
| High | Very little, incomplete or poor quality data. Largely assumption-based and difficult to verify. |
In some cases, the cost of reliefs cannot reliably be estimated because there is insufficient available information and the cost of collecting the necessary data or the burden imposed on taxpayers would be disproportionate to the potential benefits of being able to produce a cost estimate. If no administrative or external data source exists, then in general HMRC avoids increasing taxpayers’ administrative burdens by requiring information to be submitted solely for statistical purposes.
Cost estimates where the cost is zero or less than £3 million are shown as negligible. The cost estimates have been rounded according to their size, as follows:
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under £100 million – rounded to the nearest £5 million
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over £100 million but under £1 billion – rounded to the nearest £10 million
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over £1 billion – rounded to the nearest £100 million
The aim of this publication is to increase transparency about the cost of non-structural tax reliefs where cost estimates were previously unavailable. Therefore, although there is uncertainty surrounding the estimates, we have published cost estimates wherever possible, unless the estimate has the potential to be misleading to users.
When considering whether a relief cost estimate would be suitable for publication, we considered the uncertainty rating (sensitivity to specific assumptions) and the likely degree of error around the estimate including potential error size (both absolute and relative to the size of the tax).
5.1 Quality Assurance
We are committed to continuously improving the official statistics we publish. We have in place checks to minimise the risk of error and quality assurance review processes with a clear audit trail. Each section is scrutinised by analytical staff working on each of the areas. The publication is also peer reviewed by different team members and overseen by senior analysts including the team’s senior statistician.
6. User Engagement
We welcome users’ views, therefore if you have any comments on this publication please get in touch using the statistical contacts provided at the top of this bulletin. We also invite users to provide us with any data they hold which could help us to estimate the cost of any of the uncosted non-structural tax reliefs listed in the December 2021 publication.
7. Future Development
HMRC aims to continuously improve its understanding of the cost of tax reliefs. This is the fifth publication that reports on new cost estimates as part of a project to provide more information on previously uncosted reliefs. Analytical resource has been prioritised to cost non-structural reliefs. We have considered a range of criteria in prioritising within the non-structural reliefs, including size, complexity, data availability and available resourcing.
We plan to add cost estimates for further tax reliefs and will continue to expand coverage over the next 12 months. In the medium-term, HMRC will continue to review and improve the tax relief statistics collection. We published the first set of new single-year cost estimates within the established annual tax relief statistics publication in October 2020.
This publication has been produced as part of the first stage of the tax reliefs costing project, which involves a comprehensive review of currently available data to provide indicative estimates for tax reliefs. We will continue to progress this stage of the project over the course of 2022. The second stage of the project identifies those reliefs where HMRC would need to collect or purchase additional data to estimate the costs of the reliefs, and HMRC and HM Treasury will weigh the costs of acquiring data against the benefits of generating further estimates.
Four of these reliefs have been identified and listed in the associated tables published with this bulletin. HMRC has made significant progress on the coverage of costed non-structural reliefs over the project, but there may remain some uncosted reliefs due to data limitations. This project was set out in HMRC’s response to PAC in April 2019. Further information on progress against this project was last provided in the November 2021 Treasury Minutes Progress Report.