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MPs warn more tax loopholes created

Fresh loopholes for people and companies to avoid tax are being created by the UK Government, MPs have warned.

The Commons Public Accounts Committee said that despite promising to simplify the tax system, the coalition had added to the complexity by creating almost three times as many new reliefs as those it had abolished.

While the committee welcomed the fact that HM Revenue and Customs was taking more tax avoidance cases to tribunals, it questioned whether there were sufficient sanctions available to prevent tax advisers from promoting "aggressive" avoidance schemes.

In March 2011, the coalition's newly opened Office of Tax Simplification carried out a review of 155 reliefs, of which it recommended that 47 should be scrapped.

While 43 of those were subsequently abolished, a further 134 new reliefs have since been created by the Government. As of December 2013, the coalition had managed to get rid of a total of just 48.

The committee said: "Each new tax relief has made the tax system more complex, and provided an opportunity for avoidance and abuse."

The committee chair, Margaret Hodge, said it was an example of the way the "tax avoidance industry" exploited "loopholes" in legislation to devise and sell aggressive avoidance schemes. She said: "The Government spends £100 billion every year on reliefs. Whilst well-intentioned, every one of these tax reliefs creates opportunities for avoidance and evasion." She called for a radical simplification of the tax system.

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