Tax and Succession Partner, Alexander Garden, discusses impending Scottish taxes and Smith Commission devolution proposals. Watch Alexander's video here.

Alexander: So where are we with Scottish Taxes? In the immediate aftermath of the Referendum, David Cameron announced the establishment of the Smith Commission to look at the further devolution of taxes to Holyrood, and he set out a rather ambitious timetable for this with consensus proposals to be put forward by the end of November of this year and new legislation to be put in place, in draft, by the end of January 2015.

Before we come on to look at that in a bit more detail, I just want to run over a couple of Scottish Taxes that are already coming in and that were already put in place before the Referendum. The first of these is the Land and Buildings Transaction Tax, which is going to replace Stamp Duty Land Tax in Scotland, this comes in from 1st April 2015 and the proposed rates have just been announced, albeit subject to parliamentary approval. Secondly, Scottish Landfill Tax is going to replace Landfill Tax in Scotland from 1st April next year and, finally, the Scottish rate of Income Tax is scheduled to come in in 2016 and this is going to be a 10% variable rate on employment income in Scotland. So, if Holyrood sets this rate at 10% then the Income Tax rates in Scotland will remain the same as the rest of the UK. If it does nothing, Income Tax in Scotland will be 10% less than the rest of the UK or it can choose any other rate that it wishes. Importantly for all of these, the same rate has to be set for all bands, so there can be no variable for lower or higher rate tax payers in Scotland, the adjusted rate will be the same.

So, how are new Scottish taxes going to be administered? Well, Revenue Scotland has been established and will become a non-ministerial department in January of next year. And, in the same piece of legislation, we were given the appropriate powers for the administration and collection of taxes in Scotland for appeals and tribunals and also the creation of a new Scottish general anti-avoidance rule and that general anti-avoidance rule will be much tougher than the UK rule and intentionally so. John Swinney has regularly said that they're going to be intolerant of any kind of tax avoidance. The other important thing here is it will be necessary to define who is a Scottish taxpayer and that has been put in place to deal with the Scottish rate of Income Tax but, depending on what further taxes are devolved, this will become more and more important.

So, what further taxes might be devolved to Holyrood? As I said earlier on, the Smith Commission has been set the task of trying to come up with consensus proposals as to the devolution of further tax powers. This is going to be no easy task, with a very wide spectrum of opinions ranging from the Scottish National Party looking for maximum devolution, through to other parties looking for much fewer tax powers to be devolved to Holyrood. If you look at what is coming already, we can see there's already a structure in place for dealing with an element of Income Tax being administered out of Scotland, albeit the Scottish rate of Income Tax will still be collected by HM Revenue and Customs, but one could see possible further Income Tax powers being granted to Holyrood. Capital Gains Tax has not been mentioned at all and it will be interesting if Income Tax is further devolved to Holyrood but Capital Gains Tax is not; we could end up with a situation of differential rates and being administered partly by Holyrood and partly by Westminster. Similarly, Inheritance Tax, there's been no real mention of this yet and it will be interesting to see whether that is something the Smith Commission will make proposals about. Corporation Tax is one which has been talked about but, clearly, if you have differential corporate tax rates, either side of the border like that between Scotland and the rest of the UK, that could create some very interesting situations.

What we can talk about is the likely timetable for bringing in new taxes. As I said, the draft legislation is expected at the end of January but we then have a general election in Westminster next May and a Holyrood election in 2016, so I think it is inconceivable that any new taxes would be brought in in Scotland before say 2017 at the earliest.

So, in looking at all of this, the Smith Commission have to take into account very much the possibility of different taxes on different sides of the borders leading to a divergence in tax rates, and what impact that that may have on the economic recovery and the economy looking forward and, I'm sure as it is one of the disciplines in looking at devolving taxes, that they will have this very much in mind.