The Chartered Institute of Taxation (CIOT) has warned that draft legislation concerning the devolution of tax powers to Scotland could result in a broad swathe of unintended complexities, including forcing many more taxpayers into self-assessment, and that draft clauses in their current form could lead to a risk of double taxation on overseas income for Scottish taxpayers.
Chairwoman of the CIOT’s Scotland branch, Moira Kelly, said: ‘Income tax is one area where things will become more complex. For those whose residence status may change during the year, the only way of resolving their tax position will be via self-assessment since it will only be possible to determine their final residence status in retrospect. This may force many more taxpayers into self-assessment. It is essential that HMRC systems are able to cope with this increased demand [and] that current double taxation agreements between the UK and other countries treat Scottish income tax in the same manner as UK income tax. Scottish taxpayers will also face a uniquely complex system regarding the taxation of their savings income and non-savings income. The former will be subject to UK income tax rates and the latter will be subject to Scottish income tax rates.’
Meanwhile, with the release of Welsh political party Plaid Cymru’s manifesto, George Bull, senior tax partner at Baker Tilly observed that it was ‘unsurprising’ that the party ‘is calling for Wales to have the same taxation powers as Scotland while at the same time proposing that control over corporation tax is transferred, which would also bring Wales the powers which are being devolved to Northern Ireland’, adding: ‘We are also seeing a convergence of views between some of the parties on the issue of the top rate of income tax. On Monday, the Labour Party reconfirmed its commitment to reversing the cut to the top rate of income tax, and today Plaid Cymru has done the same, vowing to raise the UK additional income tax rate to 50p in the pound for those earning more than £150,000 a year.’
‘Other notable tax measures from Plaid Cymru include a proposal to raise the personal allowance threshold at which NIC is paid, with the aim of making this the same as the threshold for paying income tax. This would certainly simplify the administration of the system and reduce the scope for error, but there would also be a significant negative impact on tax receipts. It might also pave the way for something which has been in the “too difficult” tray of most parties, namely the full-scale harmonisation of income tax and NIC.
‘Among other eye-catching measures, the party is proposing to raise council tax for second home owners by up to 200%, double the bankers’ levy, introduce a new tax on sugary drinks, and a new tax relief for self-employed workers undertaking training. It also wants to increase business rates relief in Wales meaning that 70,000 would pay no business rates at all in an attempt to make town centres more affordable for small shops.’
The Chartered Institute of Taxation (CIOT) has warned that draft legislation concerning the devolution of tax powers to Scotland could result in a broad swathe of unintended complexities, including forcing many more taxpayers into self-assessment, and that draft clauses in their current form could lead to a risk of double taxation on overseas income for Scottish taxpayers.
Chairwoman of the CIOT’s Scotland branch, Moira Kelly, said: ‘Income tax is one area where things will become more complex. For those whose residence status may change during the year, the only way of resolving their tax position will be via self-assessment since it will only be possible to determine their final residence status in retrospect. This may force many more taxpayers into self-assessment. It is essential that HMRC systems are able to cope with this increased demand [and] that current double taxation agreements between the UK and other countries treat Scottish income tax in the same manner as UK income tax. Scottish taxpayers will also face a uniquely complex system regarding the taxation of their savings income and non-savings income. The former will be subject to UK income tax rates and the latter will be subject to Scottish income tax rates.’
Meanwhile, with the release of Welsh political party Plaid Cymru’s manifesto, George Bull, senior tax partner at Baker Tilly observed that it was ‘unsurprising’ that the party ‘is calling for Wales to have the same taxation powers as Scotland while at the same time proposing that control over corporation tax is transferred, which would also bring Wales the powers which are being devolved to Northern Ireland’, adding: ‘We are also seeing a convergence of views between some of the parties on the issue of the top rate of income tax. On Monday, the Labour Party reconfirmed its commitment to reversing the cut to the top rate of income tax, and today Plaid Cymru has done the same, vowing to raise the UK additional income tax rate to 50p in the pound for those earning more than £150,000 a year.’
‘Other notable tax measures from Plaid Cymru include a proposal to raise the personal allowance threshold at which NIC is paid, with the aim of making this the same as the threshold for paying income tax. This would certainly simplify the administration of the system and reduce the scope for error, but there would also be a significant negative impact on tax receipts. It might also pave the way for something which has been in the “too difficult” tray of most parties, namely the full-scale harmonisation of income tax and NIC.
‘Among other eye-catching measures, the party is proposing to raise council tax for second home owners by up to 200%, double the bankers’ levy, introduce a new tax on sugary drinks, and a new tax relief for self-employed workers undertaking training. It also wants to increase business rates relief in Wales meaning that 70,000 would pay no business rates at all in an attempt to make town centres more affordable for small shops.’
