Tax relief ‘giveaways’ to wealthy cost Britain at least £4bn a year | Business

Inheritance tax loopholes and incentives for small business owners, most often benefiting the richest people in Britain, have cost taxpayers at least £4bn a year, according to official figures.

Analysis of figures published by HM Revenue and Customs on Thursday revealed that the total cost of Britain’s system of tax relief had risen to a record £164bn annually – more than the entire NHS budget.

While the measures are designed by the government to provide support to struggling households or to encourage economic growth, campaigners and Labour seized on the figures as evidence that the tax system has become increasingly tilted in favour of the richest in society.

Peter Dowd, the shadow chief secretary to the Treasury, said there were about 200 tax reliefs for which the government had no reliable cost estimate. “Today’s publication reveals the extent of tax giveaways which the Tories have allowed to expand without proper scrutiny,” he said.

The biggest tax reliefs are zero or reduced VAT rates on purchases of food and energy, at a cost of about £53bn, followed by an exemption for capital gains tax on properties, worth £27bn, and pensions income tax relief worth £26bn.

The cost to the public purse from inheritance tax loopholes – seen as an unpopular tax on death by some, but an equitable way of redistributing wealth by others – has risen to almost £2bn.

Loopholes in the levy, which is paid by fewer than a tenth of estates and charged at 40% above the tax-free threshold of £325,000, include relief on agricultural land, business shares and transfers to charities. The cost to the taxpayer is roughly the same as the value of VAT relief on purchases of children’s clothes.

Robert Palmer, the executive director of the campaign group Tax Justice UK, said: “Many of these reliefs are simply giveaways to companies and the wealthy. HMRC rarely looks at whether they are good value for money and are actually doing what they are meant to.”

The HMRC figures also reveal that entrepreneurs’ relief, labelled by the Resolution Foundation thinktank as the “worst tax break” in Britain, will cost taxpayers £2.4bn this year.

First introduced by Labour under Gordon Brown a decade ago, and then expanded by the Conservatives, it had initially been planned to cost about £200m a year, but has now cost taxpayers about £20bn in total.

The chancellor, Philip Hammond, dismissed calls to scrap the loophole at the autumn budget, but said he would extend the qualifying period for tax relief from a year to two years to ensure it only helped genuine entrepreneurs.

A Treasury spokesperson said: “Tax reliefs play an important role in the tax system, simplifying, reducing administrative burdens, and allowing HMRC to focus resources. We keep reliefs under review to ensure that they are fiscally sustainable and value for money.”

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