Treasury Committee inquiry – Tax Reliefs

Our response focused on some general principles relating to tax reliefs and practical challenges for unrepresented taxpayers.

We noted that, for unrepresented taxpayers, where a tax relief is not automatic, there are several prerequisites for enabling taxpayers to make a successful claim. The first is awareness of the relief. In general, much more needs to be done to raise awareness among taxpayers of various reliefs. We provided the example of the marriage allowance, where it is currently thought that while there are over two million couples benefiting from the allowance, there could be just as many eligible couples that have failed to make a claim. Other prerequisites, many of which also need more work, include providing good guidance such that a taxpayer can work out if they are eligible, ensuring that processes for claiming reliefs are straightforward, and ensuring that taxpayers understand how to apply for the relief.

An additional point we made is that the creation of tax reliefs to incentivise different behaviours can place unrepresented taxpayers at a disadvantage. Those with a tax adviser may receive information about such reliefs from their adviser and therefore be able to benefit. Unrepresented taxpayers are less likely to hear about these reliefs and may miss out on them.

We highlighted the fact that the inconsistent use of terminology in relation to tax reliefs can lead to confusion and hinders understanding. For example, the terms relief and allowance are used inconsistently and for reliefs that operate in different manners.

We also reiterated a call from our December 2020 paper, ‘A better deal for the low-income taxpayer’, for fixed amount reliefs to be reviewed (and uprated where appropriate) on an annual basis, by default.

Our response can be found here