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A Scottish round-up

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Although the UK government was in purdah for much of June, business continued in both the Scottish government and the Scottish Parliament. Of interest from a tax perspective was the passing of the Air Departure Tax (Scotland) Bill; consideration of Scottish rate of income tax (SRIT) administration; and continuing work around parliamentary and budgetary procedures.

Air departure tax

The Air Departure Tax (Scotland) Bill was passed by the Scottish Parliament on 20 June and royal assent is anticipated by the end of July. The tax is expected to become operational from April 2018, when the UK air passenger duty will no longer apply to flights leaving Scottish airports. The new ADT will be collected by Revenue Scotland. Note that the new legislation will interact with the Revenue Scotland and Tax Powers Act 2014 (which set up Revenue Scotland, and sets out its general management and collection powers, in relation to devolved taxes).

The tax bands and the tax rate amounts for ADT are not in the primary legislation. Scotland does not have an annual finance act, nor does it need to set annual rates for its devolved taxes (it does for the Scottish income tax rates), so it tends to use secondary legislation for rate setting. Rates have still to be set but details are expected in the autumn and it will be interesting to see where the political decisions take these.

Administration of the SRIT 2015/16 inquiry

On 15 June, the Scottish Parliament’s Public Audit and Post-legislative Scrutiny Committee met to continue its examination of an NAO report The Administration of the Scottish Rate of Income Tax 2015/16. SRIT was the single Scottish income tax rate across all tax bands which was set at 10p for 2015/16. It was in place for one year only and has now been replaced by Scottish income tax (SIT). The Scottish Parliament now has the power to set all rates and bands of income tax. Nevertheless, the findings of the NAO report are relevant because both SRIT and SIT are levied on ‘Scottish taxpayers’, are charged on non-savings, non-dividend (NSND) income, and are collected by HMRC.

The committee had taken evidence from the auditor general for Scotland and the National Audit Office on 23 March 2017; in June it took evidence from HMRC, with the thrust of the questioning being on the identification of Scottish taxpayers. Identification is undertaken by HMRC and relies on taxpayers providing accurate, up to date addresses or HMRC checking addresses against other databases. The Committee then asked HMRC about their communications to taxpayers about Scottish status. It was noted by HMRC that this is the first time that someone’s address has had an effect on their tax, and that about 80,000 people will change their Scottish taxpayer status per year – with equal numbers either becoming Scottish or leaving Scotland.

The Committee agreed to write to HMRC to follow up on issues raised in evidence and to close its consideration of the NAO report. Further information about this can be found on the Scottish Parliament website

Parliamentary procedures

The increased powers devolved in the Scotland Act 2016 are now being implemented so there is greater uncertainty and risk attaching to the Scottish budget; in addition, the various new powers add to complexity. The Scottish Parliament’s Budget Process Review Group has been considering how the budget process should evolve, and its final report has just been published on the Scottish Parliament website.

The Commission on Parliamentary Reform recently completed a wider ranging project and published its ‘Report on the Scottish Parliament’ in June. Eighteen years after the Parliament was established (or re-established depending on your take on this), the Commission has examined how the Parliament works and whether there could be improvements to make it more effective. It has made 75 recommendations which it believes will deliver significant improvements to the way Parliament scrutinises legislation and engages with the people of Scotland.

There is plenty of potential for change in how Scottish matters, including fiscal affairs, are scrutinised. Something for parliamentarians to consider whilst the Scottish Parliament is in summer recess from 1 July to 3 September.

Charlotte Barbour, director of tax at ICAS

Issue: 1361
Categories: In brief