Alexander Garden at the Scotsman Referendum Breakfast
Scots may well pay different rates of tax to those living in the rest of the UK in coming years no matter what the outcome of the referendum on independence, according to Turcan Connell tax specialist, Partner, Alexander Garden.
Changes [in devolution legislation] likely in the tax rules regardless of the outcome of the referendum mean that, for the first time, it is likely that the amount of tax you pay will be determined by where you live in the UK, Alexander said at a breakfast meeting on the tax implications of independence, organised by the Scotsman newspaper in conjunction with Turcan Connell. If the difference is large enough, that could lead to people seeking to base themselves in the country with the lowest tax burden. With many people already living in Scotland but working in London, residency will be an important consideration – legislation enacted in 2012 deems a Scottish taxpayer, in the main, to be someone whose only or main home is in Scotland.
This isn't a hypothetical issue – as of April 2016 the Scottish Government will be obliged to set a specific Scottish Rate of Income Tax. While First Minister Alex Salmond has already shown an inclination to lower the tax burden on companies – he favours cutting Corporation Tax should Scotland vote 'Yes' in September – it's unclear what politicians in Holyrood think should happen to personal taxes, with or without full independence.
The tax situation is more uncertain still because the Scotland Act of 2012 allows for more tax powers to be devolved from Westminster without any further legislation, while some politicians have mooted the possibility of devolving Inheritance Tax and Capital Gains Tax in the event of a 'No' vote this year. In short, there are going to be changes to the tax system in Scotland, but the uncertainty is in the detail.
Among the other subjects addressed by Alexander at the meeting were:
- The introduction next year of Scotland's new Land and Buildings Transaction Tax to replace Stamp Duty Land Tax, and the introduction of a Scottish Landfill Tax. The new property tax is suggested to be fairer than its predecessors as it works on a progressive system. Rather than paying a higher rate on the entire amount when the value of a property exceeds a certain level, you will pay a blended tax rate, with a higher rate imposed on the portion of property value above a certain threshold. However, we await the rates which should be announced in the autumn.
- The White Paper on independence emphasises a desire for a simpler tax system than the present UK framework. While the Scottish Government and Revenue Scotland, the new Scottish revenue authority, have consulted widely to help them formulate policy, an ambitious legislative itinerary may hamper the ability to deal with inconsistencies and complexities in a new tax system. It's best to consider these issues in primary legislation rather than waiting for difficulties to be ironed out in secondary legislation.
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