1. Scotland’s tax powers: the 30 minute guide Anne-Marie Roberts Head of Taxation (Scottish Taxes and Indirect Taxes), ICAS 17 March 2016

2. © Copyright ICAS 2011 Outline 3 different types of tax devolution The devolved taxes and their administrative arrangements What will happen when the Scotland Bill 2015/16 is in place?

3. © Copyright ICAS 2011 Scottish or devolved taxes - Overview 3 types of devolved taxes: Fully devolved – Scottish Parliament sets rates and Revenue Scotland administers Partially devolved – Scottish Parliament sets part of rate and HMRC administers Assigned – an allocation of receipts representing Scottish VAT

4. © Copyright ICAS 2011 Devolved taxes – Why and how? Introduced in response to change to Scottish political landscape – the Scottish Parliament, the rise of the SNP, the independence referendum Key turning points were Calman Commission and Smith Commission UK legislation includes the Scotland Act 2012 (Calman), Scotland Bill 2015/16 (Smith), Scottish legislation includes Land and Buildings Transaction Tax (Scotland) Act, 2013 Landfill Tax (Scotland) Act 2014, Revenue Scotland & Tax Powers Act 2014, lots of secondary legislation SRIT is dealt with through amended UK legislation

5. © Copyright ICAS 2011 Revenue Scotland A new tax authority to deal with fully devolved taxes Composition and staffing Duties and responsibilities o Collection and management o Specific functions Accountable to the Scottish Parliament Operational approach – RoS and SEPA Tax Charter

6. © Copyright ICAS 2011 The 2016/17 position Fully devolved – LBTT, Scottish Landfill tax – administered by Revenue Scotland Partially devolved – Scottish Rate of Income Tax (SRIT) – administered by HMRC Assigned - none

7. © Copyright ICAS 2011 Post Scotland Bill 2015/16 Fully devolved – LBTT, Scottish Landfill tax, Air Passenger Duty, Aggregates Levy – Revenue Scotland Partially devolved – power for Scottish Parliament to set rates and bands for “Scottish taxpayers” - HMRC Assigned – 50% of VAT receipts allocated to Scotland - HMRC

8. © Copyright ICAS 2011 Land and Buildings Transaction Tax A tax on land transactions in Scotland Pay and file prior to registration of title Bands and rates details on Scottish Government websiteScottish Government website Different rates for residential and non-residential properties Tax imposed on a chargeable transaction unless exempt or relief claimed TAARs included Covered by Scottish GAAR in the RSTPA 2014

9. © Copyright ICAS 2011 Scottish Landfill Tax Replaced UK Landfill Tax from 1 April 2015 Operational responsibility in conjunction with Scottish Environment Protection Agency (SEPA) Collected by the site operators Key differences between Scottish and UK Landfill Tax are: o Can be levied on illegal landfill sites o SEPA to run the Scottish Landfill Communities Fund

10. © Copyright ICAS 2011 Tax management provisions RSTPA 2014 is a framework act Generic management provisions, such as o Tax returns, enquiries and assessments o Information powers and confidentiality o Investigations o Penalties o Interest payable o Enforcement o Appeals and reviews

11. © Copyright ICAS 2011 The GAAR There is a general anti-avoidance rule, which is designed to set the tone in relation to compliance – note, not the general anti-abuse rule in the UK. Other differences: No double reasonableness test Guidance – and its status No advisory panel No clearance system No DOTAS Just don’t do it!

12. © Copyright ICAS 2011 Scottish Tax Tribunals – why? A desire by some to have a separate Scottish tax tribunal to deal with the devolved taxes RSTPA 2014 part 4 and schedule 2 provides for: o The First-tier Tax Tribunal for Scotland, and o the Upper Tax Tribunal for Scotland The UK tax tribunals continue to sit in Scotland in relation to all UK taxes, which will include the Scottish Rate of Income Tax Scottish rules are very similar to UK rules but care needs to be taken as there are some differences Scotland Bill 2015/16 may have an impact

13. © Copyright ICAS 2011 Scottish Rate of Income Tax A UK tax, administered by HMRC Comes in from 6 April 2016 10% on each rate to be deducted and replaced by the Scottish rate – to be done annually ‘S’ codes for Scottish Taxpayers – have been issued by HMRC to taxpayers Operational details finalised The rate set at 10p so no changes to amounts of tax paid by Scottish taxpayers for 2016/17 – changes deferred until power to set rates and bands

14. © Copyright ICAS 2011 Further guidance re SRIT Technical note issued May 2012 – supplemented byTechnical note Updated technical note - December 2014 Guidance issued by HMRC who is a Scottish taxpayer General guidance for Scottish taxpayers on.Gov.uk Icas.com

15. © Copyright ICAS 2011 Who is a Scottish Taxpayer? Scotland Act 1998, s80D Individual must be a UK resident – otherwise SRIT is not in question Main residence/close connection Tests A – C To be identified by HMRC To be operated by employers, agents and taxpayers

16. © Copyright ICAS 2011 What income is SRIT levied on? SRIT is charged on non-savings income, ie o Earnings o Pensions o Rentals It is not charged on savings or dividends FA 2016 – Personal Savings Allowance; dividends zero-rate band to £5,000 – will ease administration for many Scottish higher rate taxpayers

17. © Copyright ICAS 2011 Scotland Bill 2015/16– from April 2017 onwards Partial devolution Income tax – rates and bands – ‘Smith’ tax – from April 2017 (CGT – will need to be calculated at marginal rate based on UK income tax rates and bands) Full devolution Aggregates Levy – deferred – European case Air Passenger duty – April 2018 Assignment Half Scottish VAT receipts – 2019/20 – working on methodology

18. © Copyright ICAS 2011 Fiscal framework and Scotland Bill 2015/16 Key issues: Interpretation of ‘no detriment’ The fiscal framework/block grant adjustment Potential unintended consequences VAT Income tax versus other taxes Proposals subject to agreement of Holyrood and Westminster Parliaments

19. © Copyright ICAS 2011 The future of Scottish taxes Devolution and partial devolution here to stay? Lessons from the introduction of SRIT - complexity of interaction with UK rules - gift aid for example Watch this space!