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TaxationWeb’s TW Ed says that the vast majority of our tax reliefs were created – and should be retained – for very good reasons.

A little over three years ago, the Office of Tax Simplification published a list of more than1,000 tax reliefs and exemptions available to businesses and to individuals. Many readers will recall that the number was much higher than the OTS, and probably anyone else, had anticipated. Many readers will also recall that, since then, the OTS’ efforts substantively to reduce that number have met with limited success.

Yesterday, the Independent newspaper reported that MPs have decided to investigate why the number of reliefs has fallen by so little.  Members of the Public Accounts Committee are, apparently, “furious” that so many remain. Good.

While I agree with the broad idea that tax should be simplified, I am not convinced that attacking the reliefs regime in the name of simplicity is necessarily the best foot forwards. If those vexed MPs want to know why there are so many, I suggest they simply start reading. A little consideration should then shed some light on why they are so numerous. To me, it is a sign of a mature tax regime, which strives to be balanced, fair and not to apply too heavy-handedly, where mitigating circumstances apply.

When I suggested in November 2010 that the OTS would struggle to do away with more than a handful of those reliefs, that claim did not seem particularly clairvoyant, just pragmatic.

For example, it would – and should – be difficult to explain why a veteran of either of the Iraq or Afghanistan (or any) wars should no longer benefit from tax relief on the value of his or her estate, should he or she die from injuries sustained while on active service. Or perhaps explain instead to his surviving, and presumably young, family. Of course I deliberately chose an exemption which would be emotive/provocative for me and for many others. But I suspect that the vast majority of those reliefs will be equally so for at least some – which is why they were installed in the first place.

One concern which I did raise three years ago, was that useful reliefs might be forfeit, if not sufficiently used. That, I am afraid to say, has come to pass: in 2011, Channel 4 started a campaign to highlight the Great British Property Scandal  – a huge national demand for residential accommodation, and a very substantial bank of empty but currently unsuitable properties. One programme focused in particular on “Flats Over Shops”; unfortunately, no matter how many times I shouted at the television, the special tax relief for (broadly) converting Flats Over Shops back into residential use was not mentioned. That relief has subsequently sunk without trace and been abolished – ostensibly for lack of use. At risk of my going hoarse again, you have been warned.

Regards all,

TW Ed