Professionals have warned on potential difficulties surrounding tax issues on Scottish independence, in light of the Scottish referendum on 18 September. At the time of writing, some cautioned on the dangers of a ‘race to the bottom’ in setting corporation tax rates (in view of suggestions of a suggested cut in the headline rate of 3%), as well as dangers on how personal tax might work between Scottish and UK systems.
Susan Ball (Crowe Clark Whitehill) said that ‘a “yes” vote would create issues over double taxation, [meaning] new treaties would need to be signed quickly – one with England’. She added that regardless of which way voting went, there would be tax implications for employers: ‘Due to the tax powers already given to Scotland from 2016, things will become more complicated for payroll departments in relation to around 5% of the Scottish population. The Scottish government will be able to set the rate of income tax at a level different than that in the rest of the UK.
‘This is going to lead to employers finding that some of their employees have S [tax] codes, liable to Scottish income tax. All payrolls must operate the Scottish rates of income tax for Scottish residents, regardless of where the employer is based. This is going to happen; it isn’t dependent upon the vote on independence. Detecting Scottish residency will be quite easy for say 95% of the people, but not for the others.’
As reported last week, George Bull (Baker Tilly) said that income tax seems set to become hotly contested between England and Scotland, regardless of whether Scotland votes ‘yes’. ‘There is growing concern that any difference in income tax rates would create loopholes for tax avoidance or even evasion, as workers and companies flit across the border to wherever the rates are lowest,’ Bull said.
Meanwhile, Richard Jordan (Thomas Eggar) warned that: ‘British people who leave a legacy in their will to a charity established only in Scotland may be surprised to find that their gift is not free from inheritance tax if Scotland votes “yes” next week. The inheritance tax exemption is often the key driver for such philanthropic giving. Current practice from HMRC is that gifts by British people to charities established outside of the EU, even if for charitable purposes in the EU, will not be eligible for inheritance tax relief.’
Professionals have warned on potential difficulties surrounding tax issues on Scottish independence, in light of the Scottish referendum on 18 September. At the time of writing, some cautioned on the dangers of a ‘race to the bottom’ in setting corporation tax rates (in view of suggestions of a suggested cut in the headline rate of 3%), as well as dangers on how personal tax might work between Scottish and UK systems.
Susan Ball (Crowe Clark Whitehill) said that ‘a “yes” vote would create issues over double taxation, [meaning] new treaties would need to be signed quickly – one with England’. She added that regardless of which way voting went, there would be tax implications for employers: ‘Due to the tax powers already given to Scotland from 2016, things will become more complicated for payroll departments in relation to around 5% of the Scottish population. The Scottish government will be able to set the rate of income tax at a level different than that in the rest of the UK.
‘This is going to lead to employers finding that some of their employees have S [tax] codes, liable to Scottish income tax. All payrolls must operate the Scottish rates of income tax for Scottish residents, regardless of where the employer is based. This is going to happen; it isn’t dependent upon the vote on independence. Detecting Scottish residency will be quite easy for say 95% of the people, but not for the others.’
As reported last week, George Bull (Baker Tilly) said that income tax seems set to become hotly contested between England and Scotland, regardless of whether Scotland votes ‘yes’. ‘There is growing concern that any difference in income tax rates would create loopholes for tax avoidance or even evasion, as workers and companies flit across the border to wherever the rates are lowest,’ Bull said.
Meanwhile, Richard Jordan (Thomas Eggar) warned that: ‘British people who leave a legacy in their will to a charity established only in Scotland may be surprised to find that their gift is not free from inheritance tax if Scotland votes “yes” next week. The inheritance tax exemption is often the key driver for such philanthropic giving. Current practice from HMRC is that gifts by British people to charities established outside of the EU, even if for charitable purposes in the EU, will not be eligible for inheritance tax relief.’
