Non-structural tax relief statistics (January 2023)

Question 1

1. Summary

Accepted Answer

This publication covers the latest estimates of the costs of non-structural reliefs in the UK tax system. Some tax reliefs are 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.

Multi-year estimates are available for 105 of these non-structural reliefs, covering around £195 billion of relief in 2021 to 2022. This estimate should be treated with caution as it does not represent the potential revenues that could be raised from abolition, because of behavioural effects, interactions between reliefs and wider economic impacts of withdrawing relief. Nevertheless it gives a sense of the scale of some of these reliefs.

This amount of relief is up £30 billion (or 18 per cent) on the total for 2020 to 2021 (£165 billion). Tax receipts increased by 20 percent in the year up to 2021 to 2022, meaning the cost of reliefs as a share of receipts has stayed broadly consistent. The increase in the aggregate amount of relief therefore reflects the buoyancy in receipts which is in turn a reflection of the underlying economy. We would expect the value of reliefs to rebound strongly in line with the recovery of the post-coronavirus (COVID-19) economy.

Caution should be exercised when looking at year on year changes in the costs of reliefs, in particular as 2020 to 2021 was affected by the COVID-19 pandemic which reduced receipts and therefore the value of many reliefs. Information about year on year increases is included in this publication but in many cases looking at changes over a longer period is a more meaningful comparison.

The 5 largest non-structural reliefs in this publication account for around 65 per cent of all non-structural tax relief covered in this publication:

CGT Private residence relief providing £37.3 billion of relief, up by £7.1 billion over 5 years
IT Registered pension schemes providing £26.9 billion of relief, up by £7.1 billion over 5 years
NICs Contributions to, and benefits from, registered pension schemes providing £24.7 billion of relief, up by £8 billion over 5 years
VAT Food providing £20.8 billion of relief, up by £1.9 billion over 5 years
VAT Construction and sale of new dwellings (includes refunds to DIY builders) providing £16.1 billion of relief, up by £1.6 billion over 5 years

This publication covers 36 of the reliefs costing more than £500 million in more detail, examining changes over time, against original forecasts (where possible) and relevant material in terms of distributional impacts and evaluation.

This publication includes 10 single-year cost estimates for non-structural reliefs where cost information was previously unavailable.

This publication includes estimates of the cost of the temporary COVID-19 reliefs, as well as the more permanent non-structural reliefs.

HMRC have now investigated 295 of the 339 non-structural reliefs. There are multiple year or single year estimates of 247 reliefs. HMRC have also established that for another 48 non-structural reliefs the costs cannot be published for disclosure reasons or we are currently unable to estimate costs.

Question 2

2. About this publication

Accepted Answer

This publication provides Official Statistics on estimated costs of tax reliefs where these are available and lists the tax reliefs where estimates are not available and explains why. These estimates provide costs from outturn years 2017 to 2018 up to 2021 to 2022 and forecasts for the current tax year 2022 to 2023.

2.1 What’s new in this publication

This publication includes information for 14 non-structural tax reliefs which have been investigated since the May 2022 publication:

new single-year cost estimates for 10 tax reliefs where cost information was previously unavailable
a further tax relief has been costed but the cost estimate cannot be published due to statistical disclosure rules
a further 3 tax reliefs have been investigated but cannot be costed at present

Cost estimates are also provided for the following reliefs relating to the government’s response to the COVID-19 pandemic including:

temporary reduced rate of VAT for hospitality, holiday accommodation and attractions
modification of the Statutory Residence Test (SRT) in connection with the coronavirus
exemption relating to COVID-19 support scheme payment (working households Tax Credits recipients)
Income Tax and National Insurance Contribution exemption for employer-provided and employer-reimbursed coronavirus antigen tests in 21/22
home office expenses (coronavirus)

The publication has been reengineered to better communicate the key findings.

2.2 Coverage of non-structural reliefs

There are 339 non-structural tax reliefs, of these:

295 have been investigated, of which:
- 247 have either a multi-year (105) or single-year (142) cost estimate
- 48 have no cost estimate, either because the cost estimate would be disclosive (26) or because we have found that we are currently unable to estimate the cost (22)
44 have yet to be investigated

2.3 Table 1: Progress on costing previously uncosted reliefs since 2019

Outcome	May 2020	October 2020	May 2021	December 2021	May 2022	January 2023	Total
Cost estimate published	45	26	29	17	15	10	142
Cost estimate withheld due to dominance and disclosure rules	0	11	12	2	0	1	26
Unable to estimate cost	2	3	4	5	5	3	22
Total	47	40	45	24	20	14	190

2.4 Structural and non-structural tax reliefs categorisations

Many tax reliefs are integral parts of the tax system. 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. Some 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.

This publication provides 2 tables:

Within each table the reliefs are also categorised by the taxes to which they apply, for example, Income Tax and Corporation Tax. Reliefs which apply to more than one tax are in a tab called ‘Multiple tax types’. This publication has been updated to better align with HMRC’s central management of tax reliefs, meaning it focuses on the non-structural tax reliefs.

For more information about structural tax reliefs, please look at the structural tax reliefs bulletin.

Question 3

3. Interpretation of estimates

Accepted Answer

How to interpret these figures:

these figures are estimates of the amount of relief which is claimed and subsequently granted each year
these estimates do not represent the gain to the exchequer should a relief be abolished because of behavioural effects, interactions between reliefs and wider economic impacts of withdrawing relief
the estimates are shown in nominal £ million
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
please refer to the supplementary notes on the tables for additional explanations for specific reliefs
single-year cost estimates are provided for the latest year that data was available when the costing was undertaken
the uncertainty rating provided should be considered when using these estimates
all costs are on an accruals basis unless otherwise stated, that is, they represent the effects on the tax liabilities for each year, not receipts in each year
- some costings are on a National Accounts basis which usually incorporates a time-shifted cash adjustment to ensure costs are recorded as close as possible to the time of the underlying economic activity that generated them
these tables are classified as Official Statistics, falling outside the scope of National Statistics owing to our forecasting the estimates, and insufficient data.

The estimates are static cost estimates, which means that they do not explicitly model behavioural responses which could result from changes to the reliefs.

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.

For Inheritance Tax reliefs, estimates are based on the details of those estates which notify HMRC of wealth transfers through Inheritance Tax returns. Inheritance tax returns often do not need to be completed for estates where some types of wealth have not been transferred, and as such a grant of probate (confirmation in Scotland) was not required.

Question 4

4. Headline statistics

Accepted Answer

4.1 Multiple-year cost estimates for non-structural reliefs

We produce 6 year cost estimates for 105 non-structural reliefs. Together they represent tax relief worth in the region of £195 billion, up £30 billion (or 18 per cent) on last year’s estimates.

Figure 1: the largest value tax reliefs within each tax head in 2021 to 2022

Figure 1 gives an illustration of the costs of non-structural tax reliefs with a multi-year cost estimate for 2021 to 2022. As discussed in the summary, the total cost of non-structural tax reliefs is dominated by the 5 largest reliefs. A full breakdown of the costs of the individual reliefs shown in the above chart is available in the estimated cost of non-structural tax reliefs table.

4.2 Change in the cost of non-structural reliefs over time

Between 2017 to 2018 and 2021 to 2022 the cost of the majority of these reliefs has increased. Of those that have increased, over half have changed by less than £50 million. Nearly a third of the 95 have remained constant over 5 years. This is broadly replicated across the different tax heads as shown in chart 3.

Looking at changes over time, we have excluded First Time Buyers’ Relief and Personal Savings Allowance where comparisons would be misleading. The former was introduced part-way through 2017 to 2018 and distorted in later years by the temporary SDLT holiday. The latter has a series break in 2018 to 2019 where the methodology has been substantially revised. Additionally, reliefs which do not have a cost estimate in either or both of the 2017 to 2018 and 2021 to 2022 tax years will be excluded from cost change analysis. This leaves us with 95 reliefs.

Figure 2: a summary of how costs of non-structural reliefs have changed from 2017 to 2018 to 2021 to 2022

Cost change band	Number of reliefs
>£1 billion decrease	1
£500 million to £1 billion decrease	3
£250 million to £500 million decrease	2
£100 million to £250 million decrease	2
£50 million to £100 million decrease	4
Up to £50 million decrease	13
No change	28
Up to £50 million increase	14
£50 million to £100 million increase	7
£100 million to £250 million increase	7
£250 million to £500 million increase	6
£500 million to £1 billion increase	2
£1 billion to £2.5 billion increase	3
>£5 billion increase	3

Figure 3: cost changes of non-structural reliefs by tax type

Tax type	Decrease	Low or no change (<£5 million)	Increase	Total
Capital taxes	9	6	5	20
Corporation Tax	3	5	9	17
Income Tax	6	6	7	19
Other	3	5	5	13
VAT	3	5	9	17
Multiple tax heads	0	2	3	5
NICs	0	0	4	4

4.3 Detailed analysis of the largest reliefs

The ‘Detailed analysis for the most significant non-structural reliefs’ section contains commentary on the cost changes over time for 36 large reliefs, defined as reliefs with a cost over £500 million in any one year between 2017 to 2018 and 2022 to 2023. The commentary discusses changes in costs over time attributed to changes in:

underlying economic factors
policy
take-up
tax base

The overall trend in the total cost of reliefs is a gradual increase, driven by a small number of large reliefs. The 5 largest reliefs within the 105 multi-year estimates cover £125.8 billion and around 65 per cent of the total cost of reliefs in this publication. They are:

Private Residence Relief from CGT (estimated at £37.3 billion in 2021 to 2022)
Pensions tax relief (estimated at £51.6 billion in 2021 to 2022) from:
- Income Tax (estimated at £26.9 billion in 2021 to 2022)
- NICs (estimated at £24.7 billion in 2021 to 2022)
VAT relief (estimated at £36.9 billion in 2021 to 2022) from:
- Food (estimated at £20.8 billion in 2021 to 2022)
- Construction and sale of new dwellings (estimated at £16.1 billion in 2021 to 2022)

The costs of these reliefs have grown modestly in nominal terms but remained relatively flat as a proportion of GDP over time. Further detail on this can be found in the Detailed analysis for the most significant non-structural tax reliefs section.

Looking at the broader set of the 36 large non-structural reliefs, 19 have increased in cost by more than 5 per cent from 2017 to 2018 to 2021 to 2022 and 15 have either decreased or increased by less than 5 per cent. As a share of GDP, 9 have increased in cost from 2017 to 2018 to 2021 to 2022 and 25 either have decreased or increased by less than 5 per cent.

The 10 reliefs with the largest changes between 2017 to 2018 and 2021 to 2022 are shown in chart 4.

Figure 4: largest percentage changes in the cost of large reliefs in the period 2017 to 2018 to 2021 to 2022

Relief name	Cost change (%)
Multiple tax types: Employer Supported Childcare including workplace nurseries IT (£570 million decrease)	-61
CT: Capital allowances: ring-fence oil business trades, first-year capital allowances for plant or machinery (£730 million decrease)	-49
CGT: Business Asset Disposal Relief (£1.1 billion decrease)	-48
IT: Exemption for the first £30,000 of a termination award that would otherwise be chargeable as specific employment income (£300 million decrease)	-34
IT: Marriage Allowance (£130 million increase)	30
IT: Registered pension schemes (£7.1 billion increase)	36
NICs: Contributions to, and benefits from, registered pension schemes (£8 billion increase)	48
IHT: Residence Nil Rate Band (£720 million increase)	79
CT: Research and development tax relief: small and medium companies scheme (£2.3 billion increase)	85
CT: High-End TV Tax Relief (£510 million increase)	204

4.4 Single-year cost estimates

Where HMRC does not produce multi-year estimates we look at whether single-year estimates are possible. Since committing in 2019 to publish cost information for more reliefs, we have published cost estimates for a further 142 non-structural reliefs that were previously uncosted. Around half of these reliefs have a cost estimate that is negligible (chart 5).

Each cost estimate has been assigned an uncertainty level. Our assessment of the uncertainty level is broad-based and considers the quality of the data used and the assumptions made.

Figure 5: costs of reliefs with a single-year costing broken down by uncertainty rating

Cost band	Low	Medium	High	Total
Negligible	32	18	22	72
£3 million < x ≤ £25 million	5	14	13	32
£25 million < x ≤ £50 million	3	1	10	14
£50 million < x ≤ £75 million	1	1	0	2
£75 million < x ≤ £100 million	0	0	5	5
£100 million < x ≤ £250 million	2	3	4	9
£250 million < x ≤ £500 million	0	2	1	3
£500 million < x ≤ £1 billion	0	1	1	2
>£1 billion	0	2	1	3

The following reliefs have a single year cost estimate over £500 million:

Income Tax and NICs - Employer provision for death or retirement benefit (£7.8 billion in 2020 to 2021)
HOD - Kerosene used as heating fuel (£2.4 billion in 2017 to 2018)
IT - Compensation awards for personal injury (£1.3 billion in 2019 to 2020)
VAT - Vehicles and other supplies to disabled people [not including vehicles] (£1 billion in 2016 to 2017)
VAT - Certain ships and aircraft (£940 million in 2019 to 2020)

4.5 Increasing the number of costed reliefs

HMRC continuously aims to improve its own, and public understanding of the impacts of tax reliefs. HMRC has prioritised additional analytical resource to undertake a multi-year project to provide more public information on the costs for reliefs where none are currently published, prioritising non-structural reliefs. This project started in 2019 and will run in 2 stages over several years.

The first stage involves a comprehensive review of currently available data to provide indicative estimates for tax reliefs. A full break-down of the progress can be found in table 1. In total, we have published new cost estimates for 142 non-structural reliefs since 2019. We will continue to expand coverage in 2023.

The second stage identifies those reliefs where HMRC would need to collect or purchase additional data to estimate the costs of the reliefs; 22 of these reliefs have been identified and listed in the associated tables with this bulletin. HMRC intends to make significant progress on the coverage of costed non-structural reliefs during the project. However, there are trade-offs about administrative burdens and collection costs, so there may remain some uncosted reliefs due to data limitations.

4.6 Developing and expanding commentary on the cost and impact of reliefs

Following recommendations from the Public Accounts Committee (PAC) in July 2020, HMRC has committed to ‘improving the available information about the groups and sectors benefitting from significant reliefs’, and to ‘identify and explain significant cost variances within reliefs’. HMRC has already made progress in the December 2021 publication:

on the former, by including links to existing statistics published elsewhere about the groups and sectors benefitting from the largest reliefs
on the latter, by expanding commentary on the changes over time in the costs of high priority non-structural tax reliefs
- we also presented a comparison of the costs of tax reliefs against their original forecast cost at introduction, prioritising non-structural tax reliefs which have been announced since the introduction of the Office for Budget Responsibility (OBR) in 2010

HMRC has continued to make progress in this area in this statistics publication this year by including:

links to and summaries of existing published analysis that may shed light on the distributional impacts and effectiveness of the most significant reliefs
summary statistics highlighting key trends and findings from across the relief costings

4.7 COVID-19 impacts on reliefs

This publication lists 7 non-structural tax reliefs which were introduced as part of the government’s response to the COVID-19 pandemic. We have provided cost estimates for several of these reliefs for the first time in this publication.

Temporary reduced rate of VAT for hospitality, holiday accommodation and attractions.

The largest of these is the temporary reduced rate of VAT for hospitality, holiday accommodation and attractions. This was announced on 8 July 2020 and allowed VAT registered businesses to apply a temporary 5 per cent reduced rate of VAT to certain supplies relating to hospitality, hotel and holiday accommodation admissions to certain attractions. The 5 per cent rate applied between 15 July 2020 and 30 September 2021. A higher rate of 12.5 per cent applied between 1 October 2021 and 31 March 2022.

The estimate in 2020 to 2021 is for a part year as the start date of the reduced rate was 15 July 2020. The estimate for 2021 to 2022 reflects the increase in the reduced rate to 12.5 per cent from 1 October 2021. The estimates for both years reflect estimates of the activity of the sector as affected by the coronavirus pandemic.

Tax year	2020 to 2021	2021 to 2022
Cost estimate (£ million)	3,100	5,500

Single-year cost estimates for other COVID-19 reliefs

Relief	Tax year	Cost estimate (£ million)	Uncertainty rating
Modification of the Statutory Residence Test (SRT) in connection with the coronavirus	2019 to 2020	Negligible	Low
Exemption relating to COVID-19 support scheme payment (working households Tax Credits recipients)	2021 to 2022	55	Low
Income tax and National Insurance contribution exemption for employer-provided and employer-reimbursed coronavirus antigen tests in 21/22	2021 to 2022	105	Medium
Home office expenses (coronavirus)	2020 to 2021	140	Medium

We will aim to provide outturn cost estimates in future releases for the remaining COVID-19 reliefs, where data is available.

In recent years this publication has included estimates of the outturn cost of reliefs for the past five financial years (for this release, 2017 to 2018 to 2021 to 2022), and a forecast year: a forecast of the total cost of each relief for the year in which the release is published (for this release, 2022 to 2023).

In 2020 we did not publish cost estimates for 2020 to 2021, the forecast year in last year’s release. This is because the massive uncertainty in predicting the path of the pandemic and public response meant that we could not produce credible and useful forecasts. With the benefit of outturn this year, for most reliefs, we have published outturn cost estimates for 2020 to 2021 for the first time, as well as forecasts of costs for 2021 to 2022.

On average, there is a higher degree of uncertainty around cost estimates for 2020 to 2021 and 2021 to 2022 compared to earlier years, and in some cases, the methodology used to estimate costs for these years has had to be adjusted to ensure greater accuracy. There is a small number of reliefs for which we do not have cost estimates for 2020 to 2021 or 2021 to 2022, as we cannot estimate the costs for these years with enough certainty.

The pandemic and the measures put in place in response have impacted the cost of reliefs. In many cases, changes in the estimated costs of reliefs between 2019 to 2020 and 2020 to 2021 reflect the decline in economic activity during 2020 to 2021. This can be seen in cost estimates for reliefs which apply to sectors particularly impacted by the pandemic such as air travel (Air Passenger Duty reliefs) and other public transport (the VAT relief for domestic passenger transport).

Question 5

5. Methodology and data quality

Accepted Answer

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 usage of the relief and thereby its cost.

There are two types of cost estimate presented in this release. HMRC tax relief statistics have historically included multiple-year cost estimates for a subset of reliefs. For reliefs where no estimates were previously published, we have prioritised estimating a single-year cost for non-structural reliefs.

Where the cost is estimated at zero or less than £3 million they are shown as ‘negligible’. The cost estimates have been rounded according to their size, as follows:

under £100 million - rounded to the nearest £5 million
over £100 million but under £1 billion - rounded to the nearest £10 million
over £1 billion - rounded to the nearest £100 million

In the structural and non-structural cost estimates tables, a hyphen in a cell indicates that the relief was not in operation in that particular year, or that we were unable to estimate the costs due to the uncertainty caused by COVID-19. Where there is a hyphen in the number of claimants section, we are not able to estimate the number of claimants.

Previously published tax relief cost estimates may change in future years of the publication, due to revisions to data, methodology or OBR economic determinants.

5.1 Multiple-year cost estimates

The download tables provide estimates of the revenue costs for the 6 years 2017 to 2018 to 2022 to 2023. These estimates are based on information available at 12 January 2023. For many reliefs, estimates of the cost rely on information on tax returns, statistics from other government departments and other data that may not be available for the most recent years at the time the estimates are produced.

For these reliefs, the figures for 2022 to 2023 (and in some cases earlier years) are projections based on previous years’ outturn data. The forecast or projection estimates are indicated with an asterisk.

For multi-year cost estimates, we have included information on the type of data and methodology used for estimating the cost of each relief. The ‘Data and methodology’ column sorts reliefs into the categories below:

there is no administrative data on the relief, it is estimated entirely using alternative data
administrative data on the use of the relief, with significant assumptions applied
administrative data on the use of the relief, with minimal assumptions applied

In subsequent annual updates, forecasted or projected figures will normally be replaced with estimates based on actual data as those estimates become available. Where estimates based on actual data change materially from one year to the next, commentary is provided explaining the main reasons for the changes.

The tax rates and allowances used in the estimates include the impact of decisions in the 2022 Autumn Statement. The forecasts reflect the OBR’s November 2022 Economic and Fiscal Outlook.

VAT reliefs

For most VAT reliefs, HMRC administrative data cannot be used to estimate costs, as VAT returns do not include information at a product level (as this would impose an excessive and unnecessary administrative burden on businesses). Instead, external economic and market data is used to estimate the value of the supplies to which the VAT reliefs apply.

The primary data sources used for estimates of costs of VAT reliefs in this publication are:

for consumer expenditure, the Consumer Trends datasets produced by the Office for National Statistics: Consumer trends, UK - Office for National Statistics
for business expenditure, the intermediate consumption sections of the supply-use tables published by the Office for National Statistics: Input-output supply and use tables - Office for National Statistics (ons.gov.uk)

Both these official statistics datasets are balanced with the national accounts and are considered to be the most reliable sources of data on expenditure at the levels of categorisation they provide. These data sources are supplemented with other datasets as required for more granular estimation, and for some reliefs more specific external data is used in place of the general Consumer Trends and Supply Use datasets.

5.2 Single-year cost estimates

The reliefs in this publication for which we have provided a single-year rather than multiple-year cost estimates were previously uncosted, which in many cases was due to data limitations. This means that most of the reliefs which are newly costed since 2019 have no readily available administrative data. Where possible, we have used suitable publicly available external data, or data from other government departments.

Where external data has been used, it is not always targeted or comprehensive. In many cases, relevant data is not directly available and so we have used proxy data and/or made assumptions. As a result, we have provided an uncertainty rating with each cost estimate. Our assessment of the uncertainty level is broad-based and considers the quality of the data used and the assumptions made. Our approach is summarised below:

Table 2: Single-year cost estimate uncertainty ratings

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 more challenging to verify.

This release provides single-year cost estimates for the latest year for which data is available. Cost estimates which apply to the years 2019 to 2020 and earlier could have significantly different cost in 2020 to 2021 due to the impact of COVID-19.

The aim of producing these single-year cost estimates is to increase transparency about the cost of non-structural tax reliefs where cost estimates were previously unavailable.

Although there is uncertainty surrounding the estimates we have published cost estimates wherever possible, unless the estimate is potentially misleading to users. When deciding whether a relief cost estimate would be suitable for publication we considered the uncertainty rating and sensitivity to specific assumptions.

5.3 Uncosted reliefs

There are a number of reliefs listed in the publication for which no cost is currently available. In many cases this is due to a lack of administrative or good-quality targeted data available on which to base an estimate. HMRC has prioritised additional analytical resource to undertake a multi-year project to provide more public information on the costs for reliefs where none are currently published, prioritising non-structural reliefs.

The tax reliefs for which no estimate of cost is available are analysed by area of the tax system for reference. The table also provides a categorisation indicating the reason why the cost information is not available, as follows:

Table 3: Uncosted relief reason codes

Reason code	Reason explanation
A	Information on the usage of this relief is not required in tax returns and cannot be reliably estimated from other data sources, and the cost of collection for statistical purposes is disproportionate.
B	Information on the usage of this relief is reported to HMRC, but the relevant data is not held in a centralised form, and the cost of gathering for statistical purposes is disproportionate.
C	Information on the usage of this relief is available, but the cost is not quantifiable as it is dependent on other unknown factors.
D	Introduction of the relief is too recent for any data to be available.
E	Exemption under the Freedom of Information Act, such as Data Protection.
F	Other (reason stated in each case).
N	We are reviewing what data is available, reason code to be allocated.
*	Data is available and requires further analysis.

Question 6

6. Quality assurance

Accepted Answer

We are committed to continuously improving the Official Statistics we publish. A panel, led by senior HMRC analysts, was set up in 2018 to review the methodology of reliefs on a rolling basis. Our quality assurance processes were reviewed in October 2020 and we have in place checks to minimise the risk of error and a rigorous quality assurance review process. The publication is also peer-reviewed by different team members and overseen by senior analysts including the team’s senior statistician.

In May 2022 we published a new background quality report for the tax relief statistics.

Question 7

7. Detailed analysis for the most significant non-structural tax reliefs

Accepted Answer

For the 36 large non-structural tax reliefs the following section explores the changes in costs over time (in cash terms and as a share of nominal GDP). Using changes in cash terms needs careful interpretation, as the cost will tend to rise and fall in line with the underlying economic activity to which the relief applies.

In the December 2021 publication HMRC published some information on evaluation (evaluative summaries) and distributional analysis. These can be found in the December 2021 release. We also recently published results for the externally commissioned evaluation of film and high-end TV tax reliefs on 17 November. Where there is no update to the evaluative summaries and distributional analysis that were provided in last year’s equivalent publication, we have removed these to avoid duplication.

Using changes in the share of nominal GDP provides one proxy to abstract from changes in underlying activity, to identify underlying changes in behaviour etc. The GDP data is taken from Table 1.4 of the November 2022 Office for Budget Responsibility Economic and fiscal outlook - supplementary economy tables.

Nominal GDP only approximately and indirectly captures the change in the underlying economic activity being relieved by assuming that some of the change in the economic activity is in line with the wider economic growth and economy-wide inflation; it also does not account for any structural changes to the tax system affecting the particular tax relief.

Where available, detailed commentary on the reasons for changes in costs against original forecasts are all captured in the comparison of forecast costs to outturn section.

The cost (£ million) and number of claimants estimates given in the following tables are outturn data except where followed by an asterisk (*), which indicates that that estimate is a forecast.

7.1 Capital Gains Tax - business asset disposal relief

Description

Certain disposals chargeable to CGT by individuals and qualifying trustees of all or part of a business are charged at 10% (up to lifetime limit of £1 million of gains as of 6 April 2020). The relief is typically available when disposing of all or part of your business.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	2,300	2,700	2,800	1,100	1,200*	1,100*
Cost (% GDP)	0.109%	0.124%	0.124%	0.053%	0.051%*	0.044%*
Number of claimants	43,000	46,000	47,000	47,000	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The increase in cost between 2017 to 2018 and 2019 to 2020 directly reflects increases in the value of gains realised, on which tax is liable at the Business Asset Disposal Relief (BADR) rate. This in turn was largely the result of equity price movements.

The sharp fall in 2020 to 2021 reflects the government’s Budget 2020 announcement to lower the BADR lifetime limit from £10 million to £1 million, implemented from 11 March 2020. Eligible disposals made on or after 11 March 2020 are affected, leading to a small impact for the 2019 to 2020 tax year.

The 2021 to 2022 and 2022 to 2023 costings are a forecast based on previous years’ actual data and the profile of the latest CGT forecast.

Cost estimates and volumes for BADR also include claims for Investors’ Relief as the two reliefs cannot be separated in the data at present. Investors’ Relief claims make up only a very small proportion of the totals presented in the table and chart. The 2019 to 2020 tax year was the first year that we saw claims of Investors’ Relief, first introduced in 2016.

Distributional analysis

From 11 March 2020, the lifetime limit for the Business Asset Disposal Relief (BADR) was reduced from £10 million to £1 million. HMRC Capital Gains Tax statistics show that 8 per cent of CGT came from disposals that qualified for the relief, a decrease from 28 per cent in the previous year. BADR was claimed by 47,000 taxpayers on £11.9 billion of gains in the 2020 to 2021 tax year, resulting in a total tax charge of £1.1 billion.

Gains eligible for BADR are concentrated amongst individuals who have larger gains. In 2020 to 2021, around 62 per cent of gains and 64 per cent of tax paid at the BADR rate came from the 17 per cent of individuals with qualifying gains of £500,000 or more. Less than 1 per cent of total gains and tax paid at the relief rate was from Trusts.

Please see the additional distributional analysis tables for more insight into the distributional impact of the relief in 2020 to 2021.

Forecast information

There is no published forecast cost for Business Asset Disposal Relief or Investors’ Relief alone. When the new tax rate for entrepreneurs was announced at Spring Budget 2008, the published forecast cost of Business Asset Disposal Relief (then Entrepreneurs’ Relief) was combined with several other Capital Gains Tax reforms. These figures are not comparable to current estimates of the outturn cost of the relief.

7.2 Capital Gains Tax - private residence relief

Description

Gains on the disposal of a residence is exempt from CGT to the extent it has been used as the person’s only or main residence.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	30,200	29,000	28,300	30,200	37,300	35,200*
Cost (% GDP)	1.436%	1.332%	1.258%	1.447%	1.592%	1.41%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The nominal cost of the relief and the share of GDP are based on outturn data on the value of UK property transactions and substantial assumptions until 2021 to 2022 and is grown in line with OBR determinants for property prices and transactions the year after (2022 to 2023).

Outturn residential property data and OBR forecasts contribute to the change in the final two years of the estimate (2021 to 2022 and 2022 to 2023). This is alongside a methodological improvement affecting the whole period, which updates the residential property holding period assumption for a five-year-rolling average of the most recent outturn data.

Distributional analysis

Homeowners receive this relief when they sell their main home. The Department for Levelling up, Housing and Communities’ (DLUHC) English Housing Survey (EHS) for 2020 to 2021 shows that 15.5 million out of a total 24 million households (65 per cent) in England were owner-occupiers.

The EHS also reported that home ownership in 2019 to 2020 was higher among older age groups, with 76 per cent of homeowners being over 45 years old and only 0.7 per cent under 24.

Statistics published by the Office for National Statistics (ONS) show that property ownership rates increase as income increases.

Forecast information

There is no original cost forecast for this relief because it predates HMRC published estimates.

7.3 Corporation Tax - capital allowances: ring-fence oil business trades, first-year capital allowances for plant or machinery

Description

Accelerated rate (100%) of capital allowance for expenditure by a company on plant or machinery for use wholly in a ring-fence trade.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	1,500	1,400	1,700	1,200	770*	1,100*
Cost (% GDP)	0.071%	0.064%	0.076%	0.057%	0.033%*	0.044%*
Number of claimants	150	150	150	150	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The costings show the impact of capital allowances used to reduce taxable profits - hence they do not include capital allowances that generate taxable losses which can be carried forwards or backwards against profits from other years or surrendered as group relief.

The profile reflects changes in oil price and hence profitability of relief claimants but also the changes made in capital investment. Sterling based oil prices increased steadily from 2016 to 2019, collapsed in 2020 due to COVID-19 and recovered again from mid-2021 onwards.

Capital investment remained flat from 2017 to 2019, fell by a third in 2020 as companies cut back in response to COVID-19 and has remained broadly flat since. The drop in oil prices associated with COVID-19, together with cutbacks in planned capital expenditure (down more than 30 per cent compared to 2019) explains the drop seen between 2019 to 2020 and 2020 to 2021.

External data sources

The external data sources used to calculate this estimate are World Bank Commodity Markets for oil prices and North Sea Transition Authority data centre for information on North Sea investment data.

Forecast information

The published forecast cost for first-year plant and machinery capital allowances for Oil and Gas Ring Fence trades from its introduction at Budget 2002 covers the years 2002 to 2003 to 2004 to 2005. This period does not overlap with the period for which we publish outturn costs in this publication, therefore the two sets of figures are not comparable.

In addition, the forecast cost of the relief when it was introduced was combined with the revenue impact of introducing the 10 per cent supplementary charge, and therefore the figures are not equivalent to current estimates of the outturn cost of the relief.

7.4 Corporation Tax - film tax relief

Description

Film production companies can claim additional corporation tax on tax relief for film production expenditure in the UK. Companies not making a profit may be able to surrender the relief and receive tax credit.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	530	580	620	380	680*	-
Cost (% GDP)	0.025%	0.027%	0.028%	0.018%	0.029%*	-
Number of claimants	680	750	820	680	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

Companies have up to two years after the end of their accounting period to make a claim for film tax relief. The cost for 2020 to 2021 is derived using partial outturn data and includes an uplift factor to account for claims not yet received by HMRC. The cost estimates for 2021 to 2022 are forecasts, with a high level of uncertainty because of the COVID-19 pandemic.

Since 2017, the cost of film tax relief increased at a gradual rate until 2019 to 2020. There are several factors that have affected the cost of film tax relief over this period. The low pound has made the UK particularly attractive for inward investors producing films in the UK. The number of claimants and cost of the relief fell sharply in 2020 to 2021. This is primarily due to the effects of the COVID-19 pandemic. It is forecasted to recover from 2021 to 2022 onwards.

Distributional analysis

Analysis by HMRC, published within the Creative Industries official statistics, shows that in recent years more than half of the total cost on a receipts basis has come from a small number of large claims over £5m.

HMRC’s Creative Industries Official Statistics provides information about the number of films, claims, number of companies and amount claimed each year.

We also recently published results for the externally commissioned evaluation of film and high-end TV tax reliefs on 17 November.

Forecast information

Film tax relief is included in the OBR’s corporation tax credits forecast in the Economic and fiscal outlook but the forecast for the cost of the Film tax relief is not published separately.

7.5 Corporation Tax - high-end TV tax relief

Description

Television production companies can claim additional corporation tax relief on producing high-end TV programmes in the UK. Companies not making a profit may be able to surrender the loss and receive a tax credit.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	250	290	470	330	760*	-
Cost (% GDP)	0.012%	0.013%	0.021%	0.016%	0.032%*	-
Number of claimants	180	220	280	290	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

Since 2017, the cost of high-end TV tax relief has been increasing until 2019 to 2020. This was mainly due to claims for large budget productions which had been expanded rapidly. The number of claimants and cost of the relief fell sharply in 2020 to 2021, though the 2020 to 2021 figures were uplifted to account for claims not yet received by HMRC. This is primarily because of the COVID-19 pandemic. It is forecasted to recover strongly from 2021 to 2022 onwards.

Distributional analysis

Analysis by HMRC, published within the Creative Industries official statistics, shows that in recent years more than half of the total cost on a receipts basis has come from a small number of large claims over £2m.

HMRC’s Creative Industries Official Statistics provides information about the number of High-End TV, claims, number of companies and amount claimed each year.

Evaluative summary

The objective of this relief is to promote the UK by encouraging the production of high-end TV in the UK.

Forecast information

High-End TV tax relief is included in the OBR’s corporation tax credits forecast in the Economic and fiscal outlook but the forecast for the cost of the High-End TV is not published separately.

7.6 Corporation Tax - patent box

Description

A reduced corporation tax rate for profits from patents etc.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	1,100	1,100	1,200	1,200*	1,100*	1,200*
Cost (% GDP)	0.052%	0.051%	0.053%	0.057%*	0.047%*	0.048%*
Number of claimants	1,305	1,405	1,395	1,535*	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The relief was phased in gradually from 2013 to 2014 to 2017 to 2018. Since 2017 to 2018 the cost remained broadly stable over time. Uncertainty around the OECD developing new rules for Intellectual Property regimes (with final rules not announced until October 2015) may also have put businesses off claiming.

In 2016, the government made changes to the design of the Patent Box to comply with new OECD rules for Intellectual Property regimes (the so-called ‘Nexus’ changes). Grandfathering’ rules allowed companies to claim under the pre-2016 rules in certain circumstances up until July 2021.

But businesses will now have to use the profit streaming method and research and development (R&D) fraction when calculating the relevant intellectual property profit. This is reflected in the forecast for 2021 to 2022 and for 2022 to 2023, and the impact will be monitored and updated accordingly.

Distributional analysis

HMRC’s Patent Box statistics (September 2022) show that in 2019 to 2020, 1,395 companies claimed relief under the Patent Box, and the total value of relief claimed was £1,220 million. 28 per cent of these companies were classified as ‘Large’ and account for 95 per cent of the relief claimed.

Over half of the companies were in the manufacturing sector (including pharmaceuticals), accounting for 32 per cent of the total relief claimed. The highest number of claims were from companies registered in the South-East (16 per cent of all claims) while North East had the lowest (2 per cent). In terms of value, London-based companies claimed 46 per cent of all relief.

Forecast information

The published forecast for Patent Box from its introduction covers the years 2013 to 2014 to 2015 to 2016. This period does not overlap with the period for which we publish outturn costs in this publication, therefore the two sets of figures are not comparable.

7.7 Corporation Tax - research and development tax relief: R&D expenditure credit

Description

Mainly for larger companies this relief allows them a taxable credit depending on their qualifying R&D expenditure.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	2,400	2,800	2,700	2,400	2,700*	-
Cost (% GDP)	0.114%	0.129%	0.12%	0.115%	0.115%*	-
Number of claimants	8,100	8,400	9,600	10,700	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The Research and Development Expenditure Credit (RDEC), also known as ‘Above the Line’ Credit, was introduced in April 2013. The Large company scheme continued to run alongside RDEC until April 2016. RDEC is now the only R&D tax relief scheme for large companies. Companies have up to two years after the end of their accounting period to make a claim.

The 2020 to 2021 RDEC estimate is based on partial outturn data with an uplift factor to account for returns not yet received by HMRC. The cost estimate for 2021 to 2022 is a forecast, with a high level of uncertainty because of the COVID-19 pandemic.

The cost of the RDEC scheme has fluctuated around a relatively stable level over the last several years. The rising costs reflect growth in qualifying R&D expenditure and increased take-up of the relief over time. The larger rise in 2018 to 2019 is partly due to the increase in the RDEC rate from 11 per cent to 12 per cent in January 2018. However, in 2020 to 2021 there was a 13 per cent decrease in the cost of support claimed through the RDEC scheme.

This has not been the case in the number of claimants, however. The number of claimants has increased from 8,100 in 2017 to 2018 to 10,700 in 2020 to 2021. This means that RDEC average claim sizes have gone down in 2020 to 2021. This could be due to several factors, most obviously the impact of the COVID-19 pandemic.

Costs are forecasted to recover and stabilise from 2021 to 2022 onwards.

Distributional analysis

HMRC’s Research and Development Tax Credits statistics (2022) provide distributional analysis relevant to the R&D RDEC relief, breaking down the number of claims and the amount of relief claimed by UK region, company size and sector.

External data sources

There are differences between R&D statistics produced from HMRC data and the other main source, Business Enterprise Research and Development (BERD). These differences are discussed in this ONS article.

Forecast information

RDEC is included in the OBR’s corporation tax credits forecast in the Economic and fiscal outlook but the RDEC forecast is not published separately.

7.8 Corporation Tax - research and development tax relief: small and medium companies scheme

Description

This is a 130% corporation tax super-deduction for small or medium-sized companies based on qualifying R&D expenditure. Loss-makers can surrender all or part of their losses for a payable credit at a rate of 14.5% of the surrendered losses.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	2,700	3,500	4,200	4,200	5,000*	-
Cost (% GDP)	0.128%	0.161%	0.187%	0.201%	0.213%*	-
Number of claimants	52,200	63,900	71,400	76,300	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The R&D SME relief allows small or medium-sized enterprises to deduct 230 per cent of their qualifying costs from their yearly profit, or to claim a 14.5 per cent tax credit if the company is loss-making. The 2020 to 2021 estimate for the R&D SME scheme is based on partial outturn data with an uplift factor to account for returns not yet received by HMRC. The cost estimate for 2021 to 2022 is a forecast, with a high level of uncertainty because of the COVID-19 pandemic.

The cost of the SME scheme has been rising sharply in recent years. Increases to the payable credit rate from 11 per cent to 14.5 per cent in 2014 and the enhancement rate from 125 per cent to 130 per cent in 2015 have made the relief more generous and attractive to SMEs. There has also been increasing awareness of the scheme. The number of claimants has increased from 52,200 in 2017 to 2018 to 76,300 in 2020 to 2021.

Distributional analysis

HMRC’s Research and Development Tax Credits statistics (2022) provide distributional analysis relevant to the R&D SME relief, breaking down the number of claims and the amount of relief claimed by UK region, company size and sector. Costs are forecast to continue to grow in 2021 to 2022, but at a slower rate than in previous years because of the impact of the COVID-19 pandemic.

External data sources

There are differences between R&D statistics produced from HMRC data and the other main source, Business Enterprise Research and Development (BERD). These differences are discussed in this ONS article.

Forecast information

The R&D SME scheme is included in the OBR’s corporation tax credits forecast in the Economic and fiscal outlook but the R&D SME forecast is not published separately.

7.9 Hydrocarbon Oil Duties - duty rate for marked gas oil and kerosene used as fuel in an engine, other than in a road vehicle or for heating

Description

Use of gas oil as motor fuel other than in road vehicles is included in the scope of the partial rebate that also applies to heating use. A partial rebate applies to kerosene used as motor fuel other than in a road vehicle. Includes use in off-road vehicles, rail, inland waterways, transport refrigeration units, generating sets etc.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	2,450	2,430	2,370	2,205	2,400	875*
Cost (% GDP)	0.117%	0.112%	0.105%	0.106%	0.102%	0.035%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of this relief has remained historically stable, though we have recently observed a dip in 2019 to 2020. This primarily reflects the effect of COVID-19, as well as a mixture of other economic impacts. The cost of relief from 2022 to 2023 is expected to be significantly lower following changes in red diesel policy starting from April 1st 2022 as detailed in an HMRC policy paper.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.10 Income Tax - charitable donations

Description

Exempts charitable donations from income tax (Higher Rate Relief, Payroll Giving, Gifts of Shares and Property, and Tax Repayments (including individual gift aid).

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	1,930	2,030	2,120	2,040	2,020	2,240*
Cost (% GDP)	0.092%	0.093%	0.094%	0.098%	0.086%	0.09%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

Before 2020 to 2021, the cost of this relief generally increased over time. In tax years ending April 2021 and April 2022, the cost of relief fell slightly due to COVID-19. For tax year 2022 to 2023, we expect the cost to increase again. This is partly due to some relief claims from February and March 2022 not being paid until April to June 2022, and partly a forecast return to the longer-term trend of increasing cost.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.11 Income Tax - enterprise investment scheme (EIS) - income tax relief

Description

Tax relief against the income tax liability for individuals of 30% of the amounts subscribed for shares in early stage qualifying trading companies. The maximum amount subscribed in a tax year on which relief can be claimed is £2 million, but any amount over £1 million must be for shares issued by one or more knowledge-intensive companies.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	560	520	530	460	520*	520*
Cost (% GDP)	0.027%	0.024%	0.024%	0.022%	0.022%*	0.021%*
Number of claimants	37,265	37,610	36,435	36,626	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of EIS has fluctuated slightly year on year. The drop in 2018 to 2019 reflects new measures restricting the use of investment within the schemes. Costs increased slightly in 2019 to 2020.

We forecast costs will drop in 2020 to 2021 as a result of COVID-19, with costs increasing above and beyond pre-pandemic levels in 2021 to 2022. Whilst there are fluctuations in the number of investors year to year, National Statistics for EIS show that there were 21,835 investors in 2012 to 2013, rising to 36,950 investors in 2019 to 2020.

Over the period covered in this publication, venture capital schemes (EIS, SEIS, SITR, VCTs) have had a number of legislative changes to incentivise uptake or to manage abuse and avoidance, with corresponding effects on the cost of the schemes.

Distributional analysis

Tables 9 and 10 of HMRC’s EIS statistical tables show that in 2020 to 2021, the total amount of investment on which relief was claimed through Self-Assessment tax returns was approximately £1.39 billion by 37,535 investors.

Around 93 per cent of investors invested less than £100,000, with the remaining 7 per cent investing amounts up to £2 million. Those investing less than £100,000 represent around 47 per cent of the total amount of investment. These estimates are provisional and subject to revision in future publications.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.12 Income Tax - exemption for the first £30,000 of a termination award that would otherwise be chargeable as specific employment income

Description

Where payments and benefits on termination of employment are below £30,000, they will not be taxed as employment income. The £30,000 threshold does not apply to any element of the payment that is post-employment notice pay (which is chargeable to income tax).

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	890	730	850	1,400	590*	610*
Cost (% GDP)	0.042%	0.034%	0.038%	0.067%	0.025%*	0.024%*
Number of claimants	-	-	250,000	600,000	200,000	200,000

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The nominal cost of the relief fell in 2018 to 2019, driven by falls in the number, and average level, of eligible redundancy payments. In April 2018 the government also tightened the scope of the exemption, lowering relief further. The very large spike in the cost and recipients of the relief in 2020 to 2021 and fall thereafter reflects a spike in redundancies during 2020 to 2021 reflecting in part the impact of COVID-19.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.13 Income Tax - marriage allowance

Description

Gives a tax reduction to a person whose spouse or civil partner has elected for a reduced Personal Allowance.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	440	460	520	540	570*	600*
Cost (% GDP)	0.021%	0.021%	0.023%	0.026%	0.024%*	0.024%*
Number of claimants	1,570,000	1,810,000	2,020,000	2,140,000	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of Marriage Allowance has shown consistent steady increases each year as the number of claimants has increased. The estimated cost figures reflect the anticipated take up of the allowance when all backdated claims have been made in future tax years (up to 4 years later).

Estimates of the number of claimants are the latest available and reflect only successful claimants up to that point in time and not the anticipated full take up when all backdated claims have been made in future tax years (up to 4 years later).

Forecast information

See the Comparison of forecast costs to outturn section for this information.

7.14 Income Tax - personal savings allowance (PSA)

Description

0% tax rate on taxable savings income. Most taxpayers get PSA of £1000, Higher Rate taxpayers get £500 PSA and PSA is not available to additional rate taxpayers.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	650	310	380	360*	350*	590*
Cost (% GDP)	0.031%	0.014%	0.017%	0.017%*	0.015%*	0.024%*
Number of claimants	-	-	10,800,000	11,100,000	11,300,000	12,000,000

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The decline in the cost of this relief from 2017 to 2018 to 2018 to 2019 is caused by new methodological updates for the 2018 to 2019 Survey of Personal Incomes (SPI), which have directly affected the estimate of the cost of relief for PSA. The grossing factors have been revised to better reflect the population of individuals submitting Self-Assessment returns.

There have also been changes to the PAYE data for bank and building society interest. From tax year 2018 to 2019 data on interest from banks and building societies are now received through NPS (National Insurance and PAYE system) data and no longer estimated through imputation. Any amounts of savings interest below £1 are rounded down to zero as per HMRC’s tax calculation.

Individuals do not have to report small amounts of savings which do not exceed the PSA. The number of individuals with savings income in excess of their PSA will decrease if interest rates or investment returns decrease. Therefore, changes in interest rates or investment returns have a significant impact on the cost of the PSA. This can be seen in 2022 to 2023 as interest rates have risen.

Forecast information

There is no published forecast cost for the Personal Savings Allowance alone. When the allowance was announced at Spring Budget 2015, the published forecast cost of the Personal Savings Allowance was combined with a measure to increase ISA flexibility. These figures are not therefore comparable to current estimates of the outturn cost of the relief.

7.15 Income Tax - registered pension schemes

Description

Covers net relief including relief on contributions, relief on investment returns, and tax paid in retirement (net of 25% lump sum).

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	19,800	19,900	23,000	25,000	26,900*	27,000*
Cost (% GDP)	0.942%	0.914%	1.023%	1.198%	1.148%*	1.081%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Improvements were made to the data and methodology for producing the figures in the preceding table. This methodology aligns with that used for Table 6 of the Private pensions statistics publication (a quality report for this publication is also available). Relief estimates for the 2017 to 2018 tax year onwards were updated for the 2022 publication.

Commentary on cost change over time

The estimated cost of registered pension schemes income tax relief has increased from 2017 to 2018 to 2020 to 2021, and the cost as a proportion of GDP has also increased in this period. The main drivers of costs during this period could be automatic enrolment and wage growth.

The minimum contribution rates for automatic enrolment increased in April 2019 which would have increased contributions and hence the cost of relief. Automatic enrolment saw over 10 million people being brought into pension savings via their employer by December 2021.

Individual contributions to personal pensions rose in 2020 to 2021 compared to 2019 to 2020. This could be because individuals increased their savings during the pandemic due to the restrictions put in place in 2020 to 2021 and put their savings into pension schemes. This therefore could have increased the cost of pension tax relief.

The OBR forecast average nominal earnings to rise significantly in 2022 to 2023, which could feed into higher pensions contributions and therefore increase the cost of relief on contributions.

The cost of Income tax relief for 2017 to 2018 onwards was estimated using a different methodology than previously published relief estimates in previous reliefs publications. This methodology aligns with that of Table 6 of the Private pension statistics publication. The main changes to the data and methodology include:

where possible, the methodology has moved towards administrative data over statistical returns and survey data, and towards outturn data over forecasted data
improvements have been made to how relief is calculated
income tax relief on contributions is now estimated gross of AA charges and LTA charges, which were previously not included in the total net cost of pensions tax relief

The full methodology for Table 6 can be found in section 5.3 of the Private pension statistics background and methodology.

Distributional analysis

ONS workplace pensions statistics show that nearly 8 of 10 of UK employees had a workplace pension in April 2021. Around 9 in 10 public sector workers were part of a workplace pension whereas around 8 in 10 private sector workers were part of a workplace pension in April 2021.

HMRC Personal and Stakeholder pension statistics (Table 6) estimate that in 2020 to 2021, relief on contributions to personal pension or private sector occupational pension schemes accounted for 69 per cent of income tax relief on pension contributions. Higher rate income tax relief accounted for 52 per cent of income tax relief on pension contributions with basic rate relief accounting for 42 per cent and additional rate relief accounting for 6 per cent.

Income tax relief on contributions to defined benefit pension schemes accounted for 53 per cent of income tax relief and contributions to defined contribution schemes accounted for the remaining 47 per cent of relief in 2020 to 2021.

Evaluative summary

The purpose of UK tax-relieved pension saving is to provide benefits in retirement for the member and/or their beneficiaries. The government provides pensions tax relief to encourage individuals to take responsibility for retirement planning and to recognise that pensions is longer-term than other forms of saving.

HMRC commissioned independent research with individuals and employers on pension tax relief in 2015. The research concluded that only 41 per cent of adults correctly believed that the government tops up people’s pension contributions through tax relief.

Many people underestimated the amount of tax relief the government provided on pension contributions. Given their lack of awareness, most people were willing to consider an alternative pension tax system, although this would not necessarily change the amount they saved.

Forecast information

Relief cost forecast estimates for 2021 to 2022 and 2022 to 2023 may differ from those later published in Table 6 of the Private pension statistics publication in 2023 due to updates for outturn data.

7.16 Income Tax and Capital Gains Tax - individual savings accounts

Description

Individuals do not pay tax on any income (i.e. dividends, interest and bonuses) they receive from their ISA savings and investments. Individuals do not pay tax on capital gains arising on their ISA investments. Providers do not pay tax on income or capital gains on investments used to back ISA policies. From 2017, not just a relief, but also a government bonus (Lifetime ISA).

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	3,050	3,200	3,000	3,300	3,550*	4,300*
Cost (% GDP)	0.145%	0.147%	0.133%	0.158%	0.152%*	0.172%*
Number of claimants	22,033,000	20,155,000	27,161,000	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of Individual Savings Accounts (ISAs) has generally increased across time. The ISA subscription limit was increased from £15,240 to £20,000 in 2017 to 2018, resulting in greater subscriptions to ISAs. This helps to explain the increase in costs between 2017 to 2018 and 2018 to 2019.

The increase in the cost of ISAs prior to this is driven by improved returns to stocks and shares and increased overall accumulated wealth in ISAs. Costs increased in 2020 to 2021 primarily due to increased saving in Stocks and Shares ISAs, combined with the stock market performing well during the COVID-19 pandemic.

It is projected that costs will continue to increase through time as greater wealth is built within ISAs. The number of beneficiaries has been fairly stable over the last few years, indicating that returns to savings and investments already held within ISAs are the primary drivers of the fluctuations in the cost of this relief.

Distributional analysis

HMRC Annual Savings Account (ISA) Statistics reported that in 2019 to 2020 approximately 13 million Adult ISAs were subscribed to £75 billion.

The average subscription was £5,738 in 2019 to 2020. The median ISA holder had an income between £20,000 and £29,999 with average ISA holdings of £21,996. For individuals with an income of £150,000 or more, the average ISA saving was £74,928. Savers in higher income groups generally preferred stocks and shares ISAs over cash ISAs while those in lower income groups strongly preferred Cash ISAs.

The greatest number of savers in 2019 to 2020 were in the 65 and over age group; this group also had the highest average ISA market value of £46,090 compared to £3,910 for under 25s and £6,366 for those aged 25 to 34. Females accounted for 50 per cent of ISA holdings worth £50,000 or more and 52 per cent of holdings worth up to £2,499.

The greatest proportion of adults holding ISAs in England was in the South West at 57 per cent and the lowest was in London at 45 per cent. The total proportion of adults holding ISAs in the United Kingdom was 51 per cent.

Forecast information

The published forecast cost for Individual Savings Accounts from its introduction at Budget 1998 covers the years 1998 to 1999 to 2000 to 2001. This time period does not overlap with the period for which we publish outturn costs in this publication, therefore the two sets of figures are not comparable.

7.17 Income Tax and Corporation Tax - capital allowances - annual investment allowance

Description

Annual Investment Allowance provides 100% income tax/corporation tax relief on qualifying capital expenditure up to a limit of £1 million. This limit has been permanently set to £1 million per annum as of Autumn Budget 2022.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	2,900	3,000	4,000	4,100	3,200*	2,600*
Cost (% GDP)	0.138%	0.138%	0.178%	0.196%	0.137%*	0.104%*
Number of claimants	1,225,000	1,225,000	1,220,000	1,260,000	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

Between 2017 to 2018 and 2018 to 2019 the cost of Annual Investment Allowance (AIA) was relatively stable, followed by a large increase in 2019 to 2020, and then a projected fall in 2021 to 2022. The number of beneficiaries of the AIA has remained stable in 2017 to 2018 and 2018 to 2019, followed by a dip in 2019 to 2020 and an increase in 2020 to 2021.

At Autumn Budget 2018 the government announced a temporary increase from £200,000 to the AIA threshold of £1 million from January 2019. This was made permanent at the Autumn Statement 2022. The higher AIA threshold is reflected in the marked increase in 2019 to 2020 and 2020 to 2021.

In 2021 to 2022 and 2022 to 2023 we project that the costs will fall. We expect much expenditure that would usually claim the 100 per cent AIA would instead claim the 130 per cent Super-Deduction which was introduced in April 2021.

Forecast information

The published forecast cost for the Annual Investment Allowance scheme when announced at Budget 2007 covers the years 2007 to 2008 up to 2009 to 2010. This time period does not overlap with the period for which we publish outturn costs in this publication, therefore the two sets of figures are not comparable.

7.18 Income Tax and NICs - employer supported childcare including workplace nurseries IT

Description

Relief from income tax for an employee in respect of employer provided care (unlimited), childcare vouchers (currently, up to £55 per week) and directly-contracted childcare (currently, up to £55 per week).

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	930	940	750	460	360	290*
Cost (% GDP)	0.044%	0.043%	0.033%	0.022%	0.015%	0.012%*
Number of claimants	-	870,000	700,000	510,000	400,000	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of the Employer Supported Childcare tax relief saw a slight year on year increase in the period from 2017 to 2018 to 2018 to 2019 and a significant decrease in 2019 to 2020 and 2020 to 2021. The slight year on year increases in cost from 2017 to 2018 to 2018 to 2019 reflect higher number of users of the scheme.

Childcare vouchers closed to new entrants in October 2018. The number of users and the cost of Employer Supported Childcare reduced significantly in 2019 to 2020 and even more so in 2020 to 2021. While the number of users is still in decline, the rate has slowed between 2020 to 2021 and 2021 to 2022. Additionally, a fall in the average individual value of Childcare vouchers cut costs further in 2020 to 2021.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.19 Inheritance Tax - business property relief

Description

Relief from IHT on the transfer of relevant business property.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	810	930	685	730*	745*	770*
Cost (% GDP)	0.039%	0.043%	0.03%	0.035%*	0.032%*	0.031%*
Number of claimants	3,330	3,240	2,820	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

In 2018 to 2019, while the number of claimants fell slightly, this was more than offset by the amount of estate value relieved increasing. In 2019 to 2020, both the number of estates claiming the relief and the amount of estate value relieved decreased significantly compared to the previous tax year, resulting in a decrease of the cost of the relief.

Distributional analysis

HMRC’s Inheritance Tax Statistics show that the total amount of estate value relieved in 2019 to 2020 was £1.86 billion, of which £1.22 billion was on unquoted shares (claimed by 1,940 estates) and £0.64 billion (claimed by 1,010) was on other business property. It is important to note here that the values being relieved are not the same as the cost to the Exchequer of the relief. This is because the value of assets qualifying for the relief are not included in the chargeable estate for IHT purposes.

Had the relief not been available, the value of those assets would have been included within the chargeable estate for IHT purposes, and after the application of available tax-free allowances, would face the relevant marginal tax rate. This determines the cost of the relief to the Exchequer.

The latest available tax year for which complete information is available is 2019 to 2020, and an estate can make more than one relief claim. For more information, please see the background quality report accompanying statistics.

Forecast information

The original cost estimates predate HMRC’s official publications of costs of reliefs.

7.20 Inheritance Tax - gifts to charities

Description

Gifts to charities and property held on trust for charitable purposes are exempt from IHT.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	905	600	615	725*	710*	725*
Cost (% GDP)	0.043%	0.028%	0.027%	0.035%*	0.03%*	0.029%*
Number of claimants	11,700	10,100	8,190	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The nominal cost of the exemption of transfers to charities on death fell in 2018 to 2019. In 2018 to 2019, while the number of estates making exempt transfers fell, the value of exempted property fell proportionately further. In 2019 to 2020, both the number of estates and the total value of exempted transfers decreased but the overall cost of the exemption increased due to an increase of the average qualifying exemption per claimant.

Distributional analysis

HMRC’s Inheritance Tax Statistics show that in 2019 to 2020 this exemption was used by 8,190 estates above the Inheritance Tax nil rate band and £1.6 billion of qualifying property was exempted. It is important to note here that the values being relieved are not the same as the cost to the Exchequer of the relief. This is because the value of assets qualifying for the relief are not included in the chargeable estate for IHT purposes.

Had the relief not been available, the value of those assets would have been included within the chargeable estate for IHT purposes, and after the application of available tax-free allowances, would face the relevant marginal tax rate. This determines the cost of the relief to the Exchequer.

The latest available tax year for which complete information is available is 2019 to 2020, and an estate can make more than one relief claim. For more information, please see the background quality report accompanying the statistics.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.21 Inheritance Tax - transfers between spouses and civil partners

Description

Transfer of any asset to a spouse/civil partner is exempt from IHT.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	3,610	2,940	2,580	3,170*	3,320*	3,590*
Cost (% GDP)	0.172%	0.135%	0.115%	0.152%*	0.142%*	0.144%*
Number of claimants	36,400	22,100	21,500	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The nominal cost of the exemption of transfers on death to surviving spouses and/or civil partners fell in 2018 to 2019. In 2018 to 2019, both the number of estates using the exemption and the total value exempted fell; but the former fell proportionately more. In 2019 to 2020, the number of estates and the total estate value exempted decreased, leading to a further decrease in the cost of the exemption.

Distributional analysis

HMRC’s Inheritance Tax Statistics for 2019 to 2020 show that this exemption continues to be the largest exemption set against assets. In 2019 to 2020, 21,500 estates made use of this exemption, and £13 billion of qualifying property was exempted.

HMRC does not publish separate distributional analysis for estates using the spouse and civil partner exemption, and the exemption is a long-standing feature of the IHT system. However, in general those who benefit from this exemption are likely to be aged 65 and above at the time of their death. Also the estate that benefits tends to be the estate of someone who is male.

This is because only married or civil partnered individuals can benefit from the exemption, and males have shorter life expectancies than females. As such, given the majority of marriages and civil partnerships are between opposite-sex individuals, females have a higher probability of living longer than their male spouse or civil partner and of receiving the latter’s exempted transferred assets.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.22 Inheritance Tax - residence nil rate band

Description

An additional threshold when a residence is being passed on to a direct descendant.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	910	1,100	1,190	1,630*	1,630*	1,750*
Cost (% GDP)	0.043%	0.051%	0.053%	0.078%*	0.07%*	0.07%*
Number of claimants	20,200	19,100	19,200	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The residence nil rate band (RNRB) was introduced in the tax year 2017 to 2018. The nominal cost of the RNRB showed consistent growth into the 2018 to 2019 and 2019 to 2020 tax years, in line with the planned increase in the generosity of the threshold.

The number of claimants reduced slightly in 2018 to 2019, despite the increase in the cost of the relief. This difference can be partially explained by the increase of the nominal value of the RNRB from £100,000 in 2017 to 2018 to £125,000 in 2018 to 2019. In 2019 to 2020, both the nominal cost and the number of claimants increased as the nominal value of the RNRB increased from £125,000 to £150,000 and the number of estates transferring wealth also rose.

Distributional analysis

The tax year 2019 to 2020 was the third year in which the new RNRB tax-free threshold could be used. This threshold provides an additional allowance to qualifying estates so that more wealth can be transferred to direct descendants before inheritance tax could be due.

The threshold was set at £150,000 for the tax year 2019 to 2020, a £25,000 increase on the tax year 2018 to 2019. In the tax year 2019 to 2020, 19,200 estates used the RNRB, and £4.1 billion of chargeable estate value was sheltered from an inheritance tax charge as a result. This was a rise of £0.5 billion compared to the tax year 2018 to 2019.

Had the threshold not been available, the value of those assets would have been included within the chargeable estate for IHT purposes, and after the application of available tax-free allowances, would face the relevant marginal tax rate. This determines the cost of the threshold to the Exchequer.

The latest available tax year for which complete information is available is 2019 to 2020, and an estate can make more than one relief claim. For more information, please see the background quality report accompanying the statistics.

Evaluative summary

The objective of this threshold is to help parents pass on the family home to their children.

The Office of Tax Simplification published a report on simplifying the design of Inheritance Tax.

Forecast information

RNRB is included in the OBR’s inheritance tax receipts forecast in the Economic and Fiscal outlook but the forecast for the cost of the RNRB is not published separately.

The original forecast costs for the RNRB were not separately published when the policy was announced in the 2015 Summer Budget. Instead, the numbers published reflected the freeze of the Nil Rate Band from the 2017 to 2018 to 2020 to 2021 tax years, the introduction of RNRB from the 2017 to 2018 tax year, and the introduction of the RNRB taper.

As a result, comparing RNRB outturn costs to the forecasted impact of the published policy package would be inappropriate.

7.23 NICs - contributions to, and benefits from, registered pension schemes

Description

Payments by way of an employer’s contribution towards a registered pension scheme or by way of any benefit pursuant to a registered pension scheme are disregarded in the calculation of earnings for the purposes of earnings-related contributions.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	16,700	17,300	21,400	23,200	24,700*	27,800*
Cost (% GDP)	0.794%	0.795%	0.952%	1.112%	1.054%*	1.113%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Improvements were made to the data and methodology for producing the figures in the preceding table. This methodology aligns with that used for Table 6 of the Private pensions statistics publication (a quality report for this publication is also available). Relief estimates for the 2017 to 2018 tax year onwards were updated for the 2022 publication.

Commentary on cost change over time

The cost of registered pension schemes National Insurance relief has increased from 2017 to 2018 to 2020 to 2021. The relief is a combination of National Insurance relief for employers on the pension contributions they make as well as the saving for individuals from the employers’ contributions not being treated as part of their gross income and subject to employee National Insurance contributions (in accordance with how individuals’ own pension contributions are treated).

The estimated cost of registered pension schemes National Insurance relief as a proportion of GDP has also increased from 2017 to 2018 to 2020 to 2021. The main drivers of costs during this period could be automatic enrolment and wage growth. The minimum contribution rates for automatic enrolment increased in April 2019 which would have increased contributions and hence the cost of relief.

The OBR forecast average nominal earnings to rise significantly in 2022 to 2023, which could feed into higher pensions contributions and therefore increase the cost of relief on contributions. National Insurance rates changed in 2022 to 2023 which increased the forecasted cost of relief in that year.

The cost of National Insurance relief for 2017 to 2018 onwards was estimated using a different methodology than previously published relief estimates. This methodology aligns with that used for Table 6 of the Private pensions statistics publication. The main changes to the data and methodology include:

where possible, the methodology has moved towards administrative data over statistical returns and survey data, and towards outturn data over forecasted data
improvements have been made to how relief is calculated

The full methodology for Table 6 can be found in section 5.3 of the Private pension statistics background and methodology.

Distributional analysis

ONS workplace pensions statistics show that nearly eight in ten UK employees had a workplace pension in April 2021. Only 20 per cent of individuals aged 16 to 21 (outside the Automatic Enrolment age) had a workplace pension, compared to 80 per cent in the next age band (22 to 29 years). The gender gap for pension participation was negligible in 2021.

HMRC Private pension statistics (Table 6) estimate that in 2020 to 2021, National Insurance relief on contributions to defined benefit schemes accounted for 60 per cent of National Insurance relief on contributions, the remaining 40 per cent of relief was on contributions to defined contribution schemes.

Forecast information

Relief cost forecast estimates for 2021 to 2022 and 2022 to 2023 may differ from those later published in Table 6 of the Private pension statistics publication in 2023 due to updates for outturn data.

7.24 NICs - employment allowance

Description

Allows up to £2,000 off employer NICs from April 2014, up to £3,000 off from April 2016, up to £4,000 off from April 2020, and up to £5,000 off from April 2022.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	2,100	2,200	2,200	2,400	2,600	3,100*
Cost (% GDP)	0.1%	0.101%	0.098%	0.115%	0.111%	0.124%*
Number of claimants	-	1,175,000	1,198,000	1,086,000	1,153,000	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of Employment Allowance has steadily increased over time. In April 2020, the allowance increased from £3,000 to £4,000. It was also restricted to businesses who have a NICs liability of under £100,000 in the previous tax year. The former more than offset the latter meaning an overall increase in the cost of the relief in 2020 to 2021.

The large forecasted growth in cost for 2022 to 2023 is partly due to the temporary rise in employer NICs rate, between 6 April 2022 and 5 November 2022, and partly due to the allowance increasing from £4,000 to £5,000.

Distributional analysis

HMRC’s Employment Allowance take-up statistics show that approximately 1,153,000 employers had benefitted from this relief in 2021 to 2022.

The largest three sectors accounted for 42 per cent of claimants, with ‘Wholesale and retail trade; repair of motor vehicles and motorcycles’ being the largest at 17 per cent (196,000). This is followed by ‘Construction’ at 13 per cent (145,000) and ‘Professional, scientific and technical activities’ at 12 per cent (140,000).

This report also shows that the largest three regions accounted for 42 per cent of claimants, with London being the largest at 18 per cent (202,000). This is followed by the South East at 14 per cent (163,000) and the North West at 10 per cent (120,000). Furthermore, 85 per cent of the claimants were ‘Micro’ employers (1 to 9 employees).

Forecast information

See the Comparison of forecast costs to outturn section for this information.

7.25 NICs - relief on employer NICs for employees under 21

Description

A zero rate of Class 1 secondary NICs for employees under 21 up to the upper earnings limit

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	600	610	630	560	670	770*
Cost (% GDP)	0.029%	0.028%	0.028%	0.027%	0.029%	0.031%*
Number of claimants	-	290,000	295,000	270,000	325,000	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The nominal cost has gradually increased up to 2019 to 2020, though the cost as a share of GDP has remained stable. The relief can be claimed across all sectors for all qualifying employees, therefore trends reflect general employment and wage patterns, rather than linking to any specific sector.

The decrease in 2020 to 2021 was likely due to COVID-19, before returning to trend in 2021 to 2022. The large forecasted growth in cost for 2022 to 2023 is partly due to the temporary rise in employer NICs rate between 6 April 2022 and 5 November 2022.

Forecast information

See the Comparison of forecast costs to outturn section for this information.

7.26 Stamp Duty Land Tax - First Time Buyers’ Relief

On 1 August 2023 the cost and number of claimants for this relief were corrected for tax years 2020 to 2021 and 2021 to 2022 to account for the impact of the stamp duty holiday in these years and make other methodological improvements. The forecast for the tax year 2022 to 2023 has been removed.

Description

Relief from SDLT for first time buyers (as defined) of purchases of residential property for £500,000 or less (£625,000 or less from 23 September 2022), provided the purchaser intends to occupy the property as their only or main residence. The relief applies to purchases from 22 November 2017.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	160	520	540	90	370	-
Cost (% GDP)	0.008%	0.024%	0.024%	0.004%	0.016%	-
Number of claimants	-	219,000	222,700	36,900	151,900	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

First Time Buyers’ Relief was announced and implemented at Autumn Budget 2017. The figure for 2017 to 2018 represents the estimated cost to HMRC for the remainder of the year and therefore has a smaller cost than the subsequent years. The cost of First Time Buyers’ Relief was relatively stable from 2018 to 2019 to 2019 to 2020.

COVID-19 and the introduction of the Stamp Duty Land Tax holiday between July 2020 to September 2021 caused the large fall and then partial rebound in the amount of relief claims and the amounts relieved in both 2020 to 2021 and 2021 to 2022.

Distributional analysis

HMRC’s Annual Stamp Tax statistics (Table 6d), which will be published later this year, will show the distributional effect of First Time Buyers’ Relief by the age of claimants up to the end of the 2022 to 2023 financial year.

Forecast information

See the ‘Comparison of forecast costs to outturn section for this information.

7.27 VAT - construction and sale of new dwellings (includes refunds to DIY builders)

Description

Zero rating of construction and sale of new relevant residential and relevant charitable buildings.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	14,500	15,900	16,000	15,300*	16,100*	16,900*
Cost (% GDP)	0.689%	0.73%	0.711%	0.733%*	0.687%*	0.677%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of this relief is driven by the number and average value of houses built. According to Office for National Statistics (ONS) data, the average new dwelling price increased by 6 per cent between 2017 to 2018 and 2020 to 2021. However, the number of permanent dwellings completed in England fell by 13 per cent in 2020 to 2021 according to statistics from the Department of Levelling Up, Housing and Communities, activity being adversely affected by COVID-19.

As the construction and sale of new dwellings makes up most of the relief, these changes are the main causes of cost changes over time. The estimate for 2021 to 2022 is a projection based on latest high-level figures available from the ONS for housing completions in the United Kingdom and new dwelling price statistics.

Distributional analysis

The ONS Construction annual tables (3.3 and 3.6) show that in quarter 3 2020, the construction industry in England and Wales was made up of around 330,000 firms and employed around 1.3 million workers. The ONS Residential property sales dataset 7 (table 1a) shows that for year ending September 2020, around 87,000 new dwellings were sold in England and Wales.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.28 VAT - domestic fuel and power

Description

Reduced rate of VAT on supplies of domestic fuel and power.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	4,900	4,800	5,100	4,800	5,200	9,200*
Cost (% GDP)	0.233%	0.22%	0.227%	0.23%	0.222%	0.368%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of the reduced rate for domestic fuel and power remained relatively stable up to 2021 to 2022. Variations in individual years were mainly a reflection of fluctuating energy prices charged by suppliers. For 2022 to 2023 the forecast reflects the increase in the Ofgem Default Tariff Cap and the government’s Energy Price Guarantee introduced from October 2022.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.29 VAT - domestic passenger transport

Description

Zero rating applies to the transport of passengers where the mode of transport takes more than 10 passengers, by Post Bus or on the UK portion of scheduled flights.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	4,700	5,000	5,000	2,400	4,100	4,400*
Cost (% GDP)	0.223%	0.23%	0.222%	0.115%	0.175%	0.176%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The nominal cost of the zero rate for domestic passenger transport rose steadily to 2019 to 2020 reflecting increases in fare prices, and growth in passenger journeys (partly the result of population growth). The estimate for 2020 to 2021 reflects the sharp reduction in use of public transport during COVID-19. There was a partial recovery in 2021-22, and continuing further recovery is forecast in 2022-23.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.30 VAT - drugs and supplies on prescription

Description

Zero rating applies to drugs dispensed by a pharmacist for personal use.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	3,100	3,100	3,200	3,500	3,600*	3,700*
Cost (% GDP)	0.147%	0.142%	0.142%	0.168%	0.154%*	0.148%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of drugs and supplies on prescription has gradually increased in nominal terms but has remained relatively stable as a proportion of GDP except when this ratio was distorted by the coronavirus pandemic.

Distributional analysis

NHS England’s prescription cost analysis (Additional tables A4) shows that in 2021 to 2022, 95.12 per cent of prescription items dispensed in the community were free of charge. However, where the prescription is free of charge, the relief still has a cost as it includes the cost to the NHS of the prescription.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.31 VAT - food

Description

Zero rating of most food (including cold food for takeaway).

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	18,900	19,400	20,200	21,000	20,800	22,500*
Cost (% GDP)	0.899%	0.891%	0.898%	1.006%	0.888%	0.901%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of the relief has risen gradually in nominal terms, including during the COVID period in 2020 to 2021 as consumers maintained expenditure on food purchases, and even increased expenditure during the closure of much of the hospitality sector. As a proportion of GDP, it has remained broadly static, except during COVID-19 in 2020 to 2021 when expenditure on food did not follow the downturn of the wider economy.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.32 VAT - the VAT zero rate for children’s clothing and protective footwear and helmets

Description

Zero rating of children’s clothing and footwear and protective boots and helmets (including motorcycle and bicycle helmets).

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	1,900	1,900	1,900	1,700	2,000	2,200*
Cost (% GDP)	0.09%	0.087%	0.084%	0.081%	0.085%	0.088%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The nominal annual cost of the relief for children’s clothing was fairly stable until the onset of COVID-19, with the cost as a share of GDP falling slightly. In the pandemic, expenditure on children’s clothing fell in nominal terms, but has since recovered.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.33 VAT - VAT registration threshold

Description

Exception from compulsory registration for VAT for traders with taxable supplies below the registration threshold.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	3,000	3,200	3,000	2,900	3,000*	2,900*
Cost (% GDP)	0.143%	0.147%	0.133%	0.139%	0.128%*	0.116%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The cost of the relief was on a rising trend due to the growing population of very small businesses until 2018 to 2019. From 2018 to 2019 onwards the threshold was frozen rather than being increased in line with the Retail Prices Index (measures announced at Autumn Budget 2017, Budget 2018 and Budget 2021). This has had the effect of drawing more businesses into VAT registration, thereby reducing the cost of the relief.

Distributional analysis

BEIS statistics state that the number of businesses (whole economy) at the start of 2022 was 5.6 million. HMRC statistics (table 2) show that 2.4 million businesses were registered for VAT at this point.

This indicates that there were around 3.2 million businesses that were not registered for VAT, as a result of this relief. In 2020-21 some 42 per cent (1.3 million) of VAT registered businesses had turnover below the registration threshold. These businesses are not required to register as a result of the relief, but have opted to register voluntarily (see Table 5a in the VAT statistics tables 2020 to 2021).

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.34 VAT - vehicles and other supplies to disabled people [vehicles only]

Description

Zero rating of certain aids and qualifying motor vehicles to the disabled.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	840	840	840	850	910	910*
Cost (% GDP)	0.04%	0.039%	0.037%	0.041%	0.039%	0.036%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

The nominal cost of vehicles supplied to disabled people tax relief has remained stable across time, with the cost as a share of GDP falling slightly, except for a slight increase in 2021-22 reflecting increases in car prices.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.35 VAT - water and sewerage services

Description

Zero rating applies to the supply of sewerage services and water (otherwise than for use in an industrial business activity).

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	2,200	2,200	2,300	2,300	2,400	2,400*
Cost (% GDP)	0.105%	0.101%	0.102%	0.11%	0.102%	0.096%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

During this period the nominal cost of the water and sewerage services tax relief has gradually increased, though the cost as a share of GDP has remained broadly flat (except in 2020-21 when this ratio was distorted by the impact of COVID-19 on GDP). The cost of the relief is driven by (regulated) water prices, and to a lesser extent by population growth. Water prices have been linked to RPI inflation which tends to be higher than CPI inflation.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

7.36 VAT - zero rate for printed matter and e-publications

Description

Zero rating applies to supplies of books, newspapers, magazines etc. in printed form and when supplied electronically.

Tax year	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Cost (£ million)	1,700	1,700	1,700	1,700	1,700	1,900*
Cost (% GDP)	0.081%	0.078%	0.076%	0.081%	0.073%	0.076%*
Number of claimants	-	-	-	-	-	-

The information in the chart is represented in the preceding table.

Commentary on cost change over time

Until 2019 to 2020 the cost remained static in nominal terms but was falling as a proportion of GDP. The cost estimates reflect the extension of the relief to e-publications with effect from 1 May 2020, which adds approximately £200 million to the cost in a full year. However, consumption was generally weak in 2020 to 2021 because of COVID-19, offsetting the increase in cost due to the change of policy in that year. Some inflationary increase is forecast in 2022-23.

Forecast information

Original cost estimates predate HMRC’s official publications of costs of reliefs.

Question 8

8. Comparison of forecast costs to outturn

Accepted Answer

The following section incorporates comparisons of the outturn costs of tax reliefs against their forecast cost when announced where it is available. We have focused on non-structural tax reliefs which have been announced since the introduction of the OBR in 2010.

Links to costing notes published at the fiscal events when these reliefs were introduced are provided, which show the original forecast numbers and explain the costing methodology. It is difficult to compare the costs of all tax reliefs with published government forecasts for a number of reasons:

projections cover a maximum of five years and might not overlap with the period covered in this publication
cost forecasts published at Budget often represent the cost of policy changes to reliefs rather than the whole cost of a relief
wider economic changes and technological developments affect the outturn cost of the relief and are unforeseeable when they are announced

8.1 Employment allowance

Description

Allows up to £2,000 off employer NICs from April 2014, up to £3,000 off from April 2016, up to £4,000 off from April 2020, and up to £5,000 off from April 2022.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	1,725	-	-	-	-	-
Cost Estimate (£ million)	2,100	-	-	-	-	-
Difference (£ million)	375	-	-	-	-	-
Percentage difference	22%	-	-	-	-	-

Commentary on differences between outturn cost and original forecast

The outturn cost is consistently higher than originally forecast. The main reasons are due to policy changes since the introduction of the relief. When implemented in April 2014 the value of the allowance was £2,000. As detailed below the allowance has subsequently increased, contributing to the increase in cost. In April 2015, the policy was extended to domestic employers of care and support workers. This increased the number of claimants and therefore the cost of the relief.

In April 2016, the policy was restricted to exclude sole-director only companies, meaning that limited companies where the director is the only employee paid earnings above the Secondary Threshold for Class 1 National Insurance contributions were no longer able to claim Employment Allowance. The value of the allowance increased to £3,000 in 2016 to 2017, increasing the cost of the relief.

The original forecast was also based on a 1% sample of employers’ end of year returns data from 2010 to 2011 and was on an accruals basis, whereas the outturn is measured using outturn receipts from HMRC systems. Since 2013 there have also been changes in the number of employers and wages.

See the policy costing note for more information.

8.2 Relief on employer NICs for employees under 21

Description

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	520	530	-	-	-	-
Cost Estimate (£ million)	600	610	-	-	-	-
Difference (£ million)	80	80	-	-	-	-
Percentage difference	15%	15%	-	-	-	-

Commentary on differences between outturn cost and original forecast

The outturn cost is consistently higher than the forecast. The original forecast was based on a 1% sample of taxpayers’ P14 data from the Survey of Personal Incomes for 2010 to 2011. Outturn is estimated using a near-complete view of employees and their monthly wages from HMRC’s Real Time Information (RTI). The SPI is on an individual basis and the RTI is on an employment basis and individuals can have multiple employments. There is a higher number of employments being claimed for than the original estimates.

Since 2013 there have been changes in OBR determinants (economic projections) which would affect the costs, including the number of relevant employments and wages (see November 2022 economic and fiscal outlook - supplementary economic tables).

See the policy costing note for more information.

8.3 Marriage allowance

Description

Gives a tax reduction to a person whose spouse or civil partner has elected for a reduced Personal Allowance.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	660	775	-	-	-	-
Cost Estimate (£ million)	440	460	-	-	-	-
Difference (£ million)	-220	-315	-	-	-	-
Percentage difference	-33%	-41%	-	-	-	-

Commentary on differences between outturn cost and original forecast

Outturn costs have been consistently lower than originally forecast. The main driver of the differences is a lower than forecast take up of the allowance when introduced in 2015 to 2016. Though the number of claimants has since increased over time, the number of claimants is still below that originally forecast.

The Budget 2014 announcement to align the Marriage Allowance to 10% of the Personal Allowance also affects the comparability of the forecast to the outturn costs. The baseline tax system forecast from the original policy will also be different due to changes in economic determinants, indexation of the tax system and policy changes to the Personal Allowance.

See the policy costing note for more information.

8.4 First Time Buyers’ Relief

Description

Relief from SDLT for first time buyers (as defined) of purchases of residential property for £500,000 or less (£625,000 or less from 23 September 2022), provided the purchaser intends to occupy the property as their only or main residence. The relief applies to purchases from 22 November 2017.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	125	560	585	610	640	670
Cost Estimate (£ million)	160	520	540	90	370	-
Difference (£ million)	35	-40	-45	-520	-270	-
Percentage difference	28%	-7%	-8%	-85%	-42%	-

Commentary on differences between outturn cost and original forecast

The outturn is relatively close to the forecast for 2017 to 2018 to 2019 to 2020. In 2020 to 2021 the SDLT holiday was introduced which meant that there was no tax payable on first time purchases below £500,000 and no need to claim the relief between 8 July 2020 and 30 June 2021. From 1 July 2021 up to 30 September 2021 there was no tax payable on the first £250,000 of the purchase price so relief claims were reduced during that period. The cost of the relief in 2020 to 2021 and 2021 to 2022 is therefore much lower than originally forecast.

See the policy costing for more information.

8.5 High-end TV tax relief

Description

Television production companies can claim additional corporation tax relief on producing high-end TV programmes in the UK. Companies not making a profit may be able to surrender the loss and receive a tax credit.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	70	-	-	-	-	-
Cost Estimate (£ million)	195	-	-	-	-	-
Difference (£ million)	125	-	-	-	-	-
Percentage difference	179%	-	-	-	-	-

Commentary on differences between outturn cost and original forecast

The cost estimates provided above are on a cash basis (rather than the accruals figures in the published tables), in order to be more comparable to the forecast cost. The outturn cost is consistently much higher than originally forecast as take-up of the relief has been significantly higher than originally anticipated.

The minimum UK expenditure requirement was reduced from 25% to 10% in 2015, increasing the number of productions that are eligible to claim the relief. This made the relief open to more taxpayers and could not have been factored into the original forecast. The high-end TV market has been expanding rapidly and the relatively low value of the British pound has made the UK more attractive to inward investors.

See the policy costing for more information.

8.6 Relief on NICs for apprentices under 25

Description

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	110	120	125	-	-	-
Cost Estimate (£ million)	110	160	190	-	-	-
Difference (£ million)	0	40	65	-	-	-
Percentage difference	0%	33%	52%	-	-	-

Commentary on differences between outturn cost and original forecast

The outturn cost is as forecasted in 2017 to 2018 and then higher in 2018 to 2019 and 2019 to 2020.

The original forecast was based on a 1% sample of employee jobs from the Annual Survey of Hours and Earnings for 2013 and BIS apprenticeship data. The outturn is estimated using a near-complete view of employees and their monthly wages from HMRC’s Real Time Information.

There is a higher number of apprenticeships being claimed for than the original number of individuals that were expected to be affected.

Since 2013 there have been changes in Office for Budget Responsibility (OBR) determinants (economic projections) which would affect costs, including the number of relevant employments and wages (see November 2022 economic and fiscal outlook - supplementary economic tables).

See the policy costing for more information.

8.7 Video games tax relief and animation tax relief

Description

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	55	-	-	-	-	-
Cost Estimate (£ million)	115	-	-	-	-	-
Difference (£ million)	60	-	-	-	-	-
Percentage difference	109%	-	-	-	-	-

Commentary on differences between outturn cost and original forecast

The cost estimates provided above are on a cash basis (rather than the accruals figures in the published tables), to be more comparable to the forecast cost. The outturn cost is much higher than originally forecast. Take-up of the video games tax relief has been significantly higher than originally anticipated. There has been strong growth in the video games industry and the relatively low value of the British pound has made the UK more attractive to inward investors.

See the policy costing for more information.

8.8 Theatre tax relief

Description

Theatre companies can claim additional corporation tax relief for UK or EEA expenditure incurred on producing theatrical productions. Companies not making a profit may be able to surrender the loss and receive a tax credit.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	20	20	-	-	-	-
Cost Estimate (£ million)	75	70	-	-	-	-
Difference (£ million)	55	50	-	-	-	-
Percentage difference	275%	250%	-	-	-	-

Commentary on differences between outturn cost and original forecast

The cost estimates provided above are on a cash basis (rather than the accruals figures in the published tables), to be more comparable to the forecast cost. The outturn cost is much higher than originally forecast. Take-up of the relief has been significantly higher than originally anticipated reflecting the relatively low value of the British pound encouraging inward investment, with theatre productions transferring from overseas.

See the policy costing for more information.

8.9 Television tax relief (children’s)

Description

Television production companies can claim additional corporation tax relief on producing children’s programmes in the UK. Companies not making a profit may be able to surrender the loss and receive a tax credit.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	5	5	5	-	-	-
Cost Estimate (£ million)	15	20	25	-	-	-
Difference (£ million)	10	15	20	-	-	-
Percentage difference	200%	300%	400%	-	-	-

Commentary on differences between outturn cost and original forecast

The cost estimates provided above are on a cash basis (rather than the accruals figures in the published tables), to be more comparable to the forecast cost. The outturn cost has been consistently above forecast since 2017 to 2018. Take-up of the relief has been higher than originally anticipated.

See the policy costing for more information.

8.10 Orchestra tax relief

Description

Orchestra companies can claim additional corporation tax relief for UK or EEA expenditure incurred on producing orchestral concerts. Companies not making a profit may be able to surrender the loss and receive a tax credit.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	10	10	10	-	-	-
Cost Estimate (£ million)	5	15	20	-	-	-
Difference (£ million)	-5	5	10	-	-	-
Percentage difference	-50%	50%	100%	-	-	-

Commentary on differences between outturn cost and original forecast

The cost estimates provided above are on a cash basis (rather than the accruals figures in the published tables), to be more comparable to the forecast cost. The outturn cost was below forecast in 2016 to 2017 and 2017 to 2018 but above forecast in the following years. Take-up of the relief has been slightly higher than originally anticipated in later years.

See the policy costing for more information.

8.11 Museums and galleries exhibition tax relief (MGETR)

Description

Charitable museum companies can claim additional corporation tax relief for UK or European Economic Area (EEA) expenditure incurred on producing exhibitions. Companies not making a profit may be able to surrender the loss and receive a payable tax credit.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	5	30	30	30	30	-
Cost Estimate (£ million)	0	5	15	15	10	-
Difference (£ million)	-5	-25	-15	-15	-20	-
Percentage difference	-100%	-83%	-50%	-50%	-67%	-

Commentary on differences between outturn cost and original forecast

The cost estimates provided above are on a cash basis (rather than the accruals figures in the published tables), to be more comparable to the forecast cost. Outturn cost is consistently below forecast. Take-up of the relief has grown more slowly than originally anticipated.

See the policy costing for more information.

Description

Tax relief against the income tax liability for individuals of 30% of the amounts invested in newly issued holdings in qualifying social enterprises. The maximum amount invested in social enterprises on which relief can be claimed is £1 million.

Metric	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
Forecast cost (£ million)	25	35	-	-	-	-
Cost Estimate (£ million)	Negligible	Negligible	-	-	-	-
Difference (£ million)	22	32	-	-	-	-
Percentage difference	88%	91%	-	-	-	-

Commentary on differences between outturn cost and original forecast

The cost estimates are very low. Estimates which round to £3 million or less are classed as ‘negligible’, so here the difference and percentage difference have been calculated assuming the cost estimate were £3 million to provide indicative differences. The income tax cost of the Social Investment Tax Relief (SITR) scheme has been consistently lower than originally forecast, reflecting much lower take up of the scheme than originally assumed.

Recently however, usage of the scheme has slightly increased. In 2018 to 2019, 75 social enterprises received investment through the Social Investment Tax Relief (SITR) scheme and £3.6 million of funds were raised, up from 25 social enterprises and £2.2 million in 2017 to 2018. The increase may be due to increased awareness of SITR, resulting from the government’s consultation on the scheme in Summer 2018 and external organisation campaigns to increase uptake. Nevertheless, the cost of the relief remains very low.

See the policy costing for more information.

Question 9

9. Annex - Revisions since December 2021 publication

Accepted Answer

Each year the estimates are updated for a number of reasons including:

new outturn data received into the department from tax returns. For some taxes there can be a substantial delay in tax
return data (or other data sources) being received due to the nature of that particular regime
improvements to methodology behind collecting information or forecasting the estimates
including the latest OBR economic forecasts in HMRC forecast models where possible

The revisions table below shows changes in the non-structural tax reliefs, which is largely due to incorporation of the latest available data. The following table includes commentary on any large changes in the figures since the previous publication. For our purposes large changes are defined as those greater than £500 million or 25 per cent.

Table 4: Summary of revisions to non-structural tax relief cost estimates since December 2021

Name	Code	Tax type	Reason for change
Construction and sale of new dwellings (includes refunds to DIY builders)	VAT - NS3	VAT	Updated for latest data.
Domestic passenger transport	VAT - NS5	VAT	Updated for latest data.
Food	VAT - NS7	VAT	Updated for latest data.
The Reduced rate of VAT for Children’s car seats.	VAT - NS9	VAT	Updated for latest data.
Reduced rate of VAT on energy saving materials	VAT - NS11	VAT	Updated for latest data.
VAT registration threshold	VAT - NS14	VAT	Updated methodology.
First Time Buyers Relief	SDLT - NS4	Stamp Duty Land Tax	Updated methodology.
Exemption for children aged between two and sixteen in standard class travel	APD - NS1	Air Passenger Duty	The 25% increase in 2021-22 relief cost between the 2021 and 2022 editions is mainly driven by rounding (figures under £100 million are rounded to the nearest £5 million).
Exclusion from CPS rates for supplies to good quality CHP stations	CPF - NS1	Carbon Price Floor	Updated for latest data. The large increases in all years are driven by an increase in GQCHP fuel consumption.
Exemption for supplies to good quality CHP stations	CCL - NS1	Climate Change Levy	Updated for latest data. The large change in 2021-22 reflects a large increase in the consumption of natural gas by CHP stations.
Exemption for the first £30,000 of a termination award that would otherwise be chargeable as specific employment income	IT - NS9	Income Tax	Updated for latest data. Termination payments were heavily affected by the pandemic.
Personal Savings Allowance (PSA)	IT - NS18	Income Tax	Updated for latest data. Outturn SPI data and upward revisions to forecast returns to savings have increased the estimated cost of this relief.
Children’s TV Tax Relief	CT - NS2	Corporation Tax	Updated for latest data. Revision made to reflect the latest outturn data for Creatives 2022 publication and also due to rounding.
High-End TV Tax Relief	CT - NS4	Corporation Tax	Updated for latest data. Revision made to reflect the impact of COVID-19 restrictions.
Theatre tax relief	CT - NS9	Corporation Tax	Updated for latest data. Revision made to reflect the impact of COVID-19 restrictions.
Video games tax relief	CT - NS11	Corporation Tax	Updated for latest data. Revision made to reflect the impact of COVID-19 restrictions.
Museums and Galleries exhibition tax relief (MGETR)	CT - NS12	Corporation Tax	Updated for latest data. Revision made to reflect the impact of COVID-19 restrictions.
Orchestra tax relief	CT - NS13	Corporation Tax	Updated for latest data. Revision made to reflect the impact of COVID-19 restrictions.
Film tax relief	CT - NS3	Corporation Tax	Updated for latest data. Revision made to reflect the impact of COVID-19 restrictions.
Land remediation relief	CT - NS5	Corporation Tax	Updated for latest data. Revision made to reflect the latest outturn data.
Research and development tax relief: R&D Expenditure Credit	CT - NS7	Corporation Tax	Updated for latest data. Claims for the tax year 2020 to 2021 can still be submitted past the cut-off date for our National Statistics extraction. They are provisional and have been grossed up to account for claims not yet received. Statistics will be revised in next year’s publication to include claims received after the cut-off date, which can sometimes result in large changes between the publications. 2021 to 2022 year is a forecast.
Research and development tax relief: small and medium companies scheme	CT - NS8	Corporation Tax	Updated for latest data. Claims for the tax year 2020 to 2021 can still be submitted past the cut-off date for our National Statistics extraction. They are provisional and have been grossed up to account for claims not yet received. Statistics will be revised in next year’s publication to include claims received after the cut-off date, which can sometimes result in large changes between the publications. 2021 to 2022 year is a forecast.
Enterprise Investment Scheme (EIS) - disposal relief	CGT - NS3	Capital Gains Tax	Updated methodology.
Venture Capital Trusts (VCTs) - disposal relief	CGT - NS6	Capital Gains Tax	Revisions to OBR determinants used in costing.
Venture Capital Trusts (VCTs) - exemption from income tax on dividends received from VCTs	IT - NS5	Income Tax	Updated methodology.
Tonnage tax	CT - NS10	Corporation Tax	Updated for latest data. The 2019/20 and 2020/21 outturn years have both been updated as the last publication used outturn from year 2018/19. For year 2020/21, the fall in activity is likely explained by COVID-19.
Capital allowances - annual investment allowance	IT_CT - NS1	Income Tax and Corporation Tax	Updated for latest data. For year 2020/21, the increase is due to new outturn data; COVID-19 had smaller impact on the AIA than assumed in the last publication. The decrease in 2021/22 reflects the interaction between the AIA and the super-deduction.
Business property relief	IHT - NS2	Inheritance Tax	Updated for latest data.
Conditional exemption	IHT - NS3	Inheritance Tax	Updated for latest data.
Transfers between Spouses and Civil Partners	IHT - NS5, NSU - IHT22, NSU - IHT6	Inheritance Tax	Updated for latest data.
Gifts to Charities - tax charged at lower rate	IHT - NS7	Inheritance Tax	Updated for latest data.
Quick succession relief	IHT - NS8	Inheritance Tax	Updated for latest data.
Private residence relief	CGT - NS1	Capital Gains Tax	Updated methodology. Along with new residential property data and OBR determinants, the methodology has been improved to take a more recent average for holding periods, specifically a five year rolling average for the most recent outturn data.
Business Asset Disposal Relief	CGT - NS2	Capital Gains Tax	Updated for latest data. In November 2020 the Office of Tax Simplification published a report on Capital Gains Tax in which they made a recommendation to government to ‘consider more closely aligning Capital Gains Tax rates with Income Tax rates’. In addition, the OTS made a recommendation to ‘consider replacing Business Asset Disposal Relief with a relief more focused on retirement’. As a result of these recommendations and speculation in the media about potential changes to the CGT rates, some of the increase in gains and CGT in the 2020 to 2021 tax year could reflect taxpayers bringing forward disposals in response to anticipated tax rises. These recommendations were not implemented.
Capital allowances: ring-fence oil business trades, first-year capital allowances for plant or machinery	IT_CT - NS3	Corporation Tax	Updated for latest data. Higher proportion of FYA relief claimed in 2020/21 was effective “in year” than previously estimated. Capex spend in 2020/21 in CT Return outturns also higher than estimated last year (from NSTA data centre).
Allowances against Supplementary Charge	CT - S4, NSU - CT1, NSU - CT2, NSU - CT10	Corporation Tax	Updated for latest data. Impact of COVID-19 reduced profitability and companies responded by reining in Capex spend (2020/21). These trends were reversed when the industry came out of COVID-19 (2021/22).
Premium Bond prizes	IT - NS19	Income Tax and Capital Gains Tax	Updated for latest data. The increase in costs between 2021-22 is due to increases in interest rates.
Income from savings certificates	IT - NS13	Income Tax	Updated for latest data. The increase in costs between 2021-22 is due to an increase in inflation.
Registered pension schemes	IT - NS21	Income Tax	Updated methodology. Methodology has been updated for 2017-18 to 2019-20, latest data has been used for 2020-21, new OBR determinants have been used to project 2021-22 and 2022-23.
Contributions to, and benefits from, registered pension schemes	NIC - NS4	NICs	Updated methodology. Methodology has been updated for 2017-18 to 2019-20, latest data has been used for 2020-21, new OBR determinants have been used to project 2021-22 and 2022-23.

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1. Summary

2. About this publication

2.1 What’s new in this publication

2.2 Coverage of non-structural reliefs

2.3 Table 1: Progress on costing previously uncosted reliefs since 2019

2.4 Structural and non-structural tax reliefs categorisations

3. Interpretation of estimates

4. Headline statistics

4.1 Multiple-year cost estimates for non-structural reliefs

Figure 1: the largest value tax reliefs within each tax head in 2021 to 2022

4.2 Change in the cost of non-structural reliefs over time

Figure 2: a summary of how costs of non-structural reliefs have changed from 2017 to 2018 to 2021 to 2022

Figure 3: cost changes of non-structural reliefs by tax type

4.3 Detailed analysis of the largest reliefs

Figure 4: largest percentage changes in the cost of large reliefs in the period 2017 to 2018 to 2021 to 2022

4.4 Single-year cost estimates

Figure 5: costs of reliefs with a single-year costing broken down by uncertainty rating

4.5 Increasing the number of costed reliefs

4.6 Developing and expanding commentary on the cost and impact of reliefs

4.7 COVID-19 impacts on reliefs

Temporary reduced rate of VAT for hospitality, holiday accommodation and attractions.

Single-year cost estimates for other COVID-19 reliefs

5. Methodology and data quality

5.1 Multiple-year cost estimates

VAT reliefs

5.2 Single-year cost estimates

Table 2: Single-year cost estimate uncertainty ratings

5.3 Uncosted reliefs

Table 3: Uncosted relief reason codes

6. Quality assurance

7. Detailed analysis for the most significant non-structural tax reliefs

7.1 Capital Gains Tax - business asset disposal relief

Description

Figure 6: nominal annual cost (£ million) and cost as a share of GDP (%)

Commentary on cost change over time

Distributional analysis

Forecast information

7.2 Capital Gains Tax - private residence relief

Description

Figure 7: nominal annual cost (£ million) and cost as a share of GDP (%)

Commentary on cost change over time

Distributional analysis

Forecast information

7.3 Corporation Tax - capital allowances: ring-fence oil business trades, first-year capital allowances for plant or machinery

Description

Figure 8: nominal annual cost (£ million) and cost as a share of GDP (%)

Commentary on cost change over time

External data sources

Forecast information

7.4 Corporation Tax - film tax relief

Description

Figure 9: nominal annual cost (£ million) and cost as a share of GDP (%)

Commentary on cost change over time

Distributional analysis

Forecast information

7.5 Corporation Tax - high-end TV tax relief

Description

Figure 10: nominal annual cost (£ million) and cost as a share of GDP (%)

Commentary on cost change over time

Distributional analysis

Evaluative summary

Forecast information

7.6 Corporation Tax - patent box

Description

Figure 11: nominal annual cost (£ million) and cost as a share of GDP (%)

Commentary on cost change over time

Distributional analysis

Forecast information

7.7 Corporation Tax - research and development tax relief: R&D expenditure credit

Description

Figure 12: nominal annual cost (£ million) and cost as a share of GDP (%)

Commentary on cost change over time

Distributional analysis

External data sources

Forecast information

7.8 Corporation Tax - research and development tax relief: small and medium companies scheme

Description

Figure 13: nominal annual cost (£ million) and cost as a share of GDP (%)

Commentary on cost change over time