When we talk about tax reliefs (the abuse of which have been a hot topic in the press recently) we are really talking about two different things: tax reliefs and tax expenditures.

A tax relief is designed to ensure that a tax is only applied to the group it was originally intended for. Cabin crew do not have to pay air passenger duty – the duty is intended to apply to paying passengers and it would be unfair to apply it to the crew! So this is a relief.

A tax expenditure is an alternative to a public spending program and are designed to have similar effects – to incentivse certain behavior through the tax system. Tax relief on pension contributions is a tax expenditure that encourages us to save for our retirement.

In the investment world, we tend to encounter tax expenditures – incentives to either save (think ISAs and pensions) or to put capital to work where it is needed most (think VCTs and EIS).