Few, particularly in Scotland, will be unaware of the 18 September 2014 date for the Scottish independence referendum. What may be less well-known is that regardless of the outcome of the referendum, tax changes are on their way in Scotland. Moira McMillan, Tax Director at Chiene + Tait, outlines what this means for businesses and individuals.
The Scotland Act 2012 introduced a new Scottish rate of income tax to be implemented from April 2016. More recently, the Land and Buildings Transaction Tax (Scotland) Act 2013 received Royal Assent on 31 July 2013. This Act will see the end of Stamp Duty Land Tax (SDLT) in Scotland. From April 2015, SDLT will be replaced by a Land and Buildings Transaction Tax (LBTT). The Scottish Government has yet to set the rate of the LBTT and have indicated that it is unlikely to do so before Autumn 2014. The uncertainty will be an issue for those trying to plan ahead as it is impossible to know whether the LBTT will result in a higher or lower liability than the existing SDLT regime.
The LBTT will apply to land transactions in Scotland. That should be clear-cut and unambiguous. The Scottish rate of income tax will apply to “Scottish Taxpayers”.
How is this defined? The guidance published by HM Revenue & Customs to date states “Broadly, if you live in Scotland, you are a Scottish taxpayer. Scottish people living outside Scotland are not Scottish taxpayers. Non-Scottish UK residents living in Scotland are.” There will doubtless be many who split their time between homes in Scotland and elsewhere who will find themselves entangled in the type of detailed legislation we have seen with the UK Statutory Residence Test, which came into force from April 2013.
We will examine the new Scottish taxes in more detail in future articles and will consider the impact of the devolved tax system for individuals, trustees, businesses, employers, charities and pension schemes.