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Scottish VAT assignment model

printer Mail

HM Treasury has published a paper outlining the methodology for calculating Scottish VAT receipts, developed jointly with HMRC and the Scottish government. The Scottish fiscal framework agreed in February 2016 set out the basis for assigning VAT to the Scottish government, leaving the full methodology to be developed in time for implementation in 2019/20.

Under the Scotland Act 2016, the UK Government agreed to assign the first 10p of the standard rate of VAT (20%) and the first 2.5p of the reduced rate of VAT (5%) raised in Scotland to the Scottish government.

The fiscal framework agreement between the UK and Scottish governments provided for HMRC and Scottish government officials to develop a methodology to calculate the Scottish share of UK VAT receipts, with a corresponding reduction in the Scottish government’s block grant.

The model outlined in the paper has been developed jointly by HMRC, the Scottish government and HM Treasury, based on HMRC’s ‘VAT total theoretical liability model’, which is an internationally recognised method for calculating the theoretical amount of VAT that should be received by a tax jurisdiction. The model aims to calculate the VAT on expenditure in Scotland by ‘final consumers’, mainly individuals but also including businesses and other organisations who cannot recover the VAT they incur.

The UK and Scottish governments will seek comments on the model from key stakeholders in early 2019 and will announce further details over the next few weeks. See

Issue: 1423
Categories: News