Scottish tax plans create additional complexity and anomalies, experts warn

Planned changes to Scottish rates of income tax would add further complexity to a system that is already difficult for taxpayers to understand, tax professionals said after Derek Mackay, cabinet secretary for finance and the constitution, set out Scotland’s draft budget on December 14.

“Complexity is the price Scots will pay for exercising devolved powers over income tax. Today’s announcement underlines the increasingly diverging nature of income tax between Scotland and the rest of the UK,” said Moira Kelly, chair of the Chartered Institute of Taxation’s Scottish Technical Committee. The proposals have the potential to “increase both the costs and complexity of administering Scottish income tax as well as throwing into the mix some interesting anomalies,” she said.

The changes would establish Scotland as “a country with a very distinct tax system from the rest of the UK,” said Lindsay Hayward, head of tax for PwC in Scotland.

My news story for Tax Analysts, December 15 (paywall)

UK, Scottish governments at odds over air departure tax

HM Treasury has denied that devolution of the UK’s air passenger duty was flawed, after the Scottish government said that moving forward with plans to replicate an existing exemption for travel from Scottish Highlands and Islands under the new air departure tax could put those regional economies at risk if the exemption is found to violate EU state aid rules.

“It is disappointing that the Scottish government has been unable to design a tax which is compliant with EU law,” a Treasury spokesperson said in an emailed statement October 5. “It is wrong for them to try and pass the blame for their unwillingness to take responsibility for their own tax.” Read more:

My news story for Tax Analysts, October 6 (paywall)

Scottish government opens debate on income tax strategy

The Scottish government has launched a debate on the use of devolved tax powers to protect public services in the face of continued austerity imposed by the UK government, first minister Nicola Sturgeon told members of the Scottish Parliament on September 5.

Sturgeon was outlining her minority government’s priorities for the 2017/18 parliamentary session. The programme sets out 16 proposed bills, including measures to implement budget proposals expected to be announced later this year. The Scottish government recognises that “taxation must be used responsibly and progressively, and that taxpayers value certainty”, according to a government paper titled “A Nation with Ambition” ….

Ruth Davidson, leader of the Scottish Conservatives, warned that “dragging Scotland down with ever more punitive taxes is not the right way.” Read more:

My news story for Tax Analysts, September 6 (paywall)

Wales consults on tackling artificial tax avoidance arrangements

The Welsh government is consulting on anti-avoidance measures targeting land transaction tax (LTT) relief and artificial arrangements entered into to avoid tax.

The Welsh Revenue Authority, which is expected to be established next year, will be responsible for the collection and management of the LTT and will undertake most of the collection and management functions for landfill disposals tax. The new taxes will replace the U.K.’s stamp duty land tax and landfill tax from April 2018. The Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Bill, introduced in the National Assembly for Wales September 12, sets out measures to tackle avoidance of the devolved taxes.

Read more: My news story for Tax Analysts, 20 September (paywall).

Tax devolution: Draft Scotland Bill published

The UK government has published draft legislation to deliver more powers, including tax powers, to the Scottish parliament.

“Further work” is required and the new Scotland Bill will not be presented to parliament until after the general election. The draft legislation is in line with the Smith Commission recommendations, but some of the tax measures – for example, those required to deal with pension tax relief and gift aid – will be dealt with in secondary legislation. Continue reading