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The planned devolution of tax powers to Scotland could result in a broad swathe of unintended complexities, including forcing many more taxpayers into self assessment, according to the Chartered Institute of Taxation (CIOT).
The planned devolution of tax powers to Scotland could result in a broad swathe of unintended complexities, including forcing many more taxpayers into self assessment, according to the Chartered Institute of Taxation (CIOT).
In its response to the government document Scotland in the United Kingdom: an Enduring Settlement, the CIOT voices concern that draft clauses aimed at devolving tax powers could lead to a risk of double taxation on Scottish taxpayers’ overseas income.
The chair of the institute’s Scottish branch, Moira Kelly, called for simplicity, insisting it “must remain the foundation stone of tax devolution”. She warned that income tax will be a key area of extra complication under the proposed changes.
“For those whose residence status may change during the year, the only way of resolving their tax position will be via self assessment, since it will be possible to determine their final residence status only in retrospect,” said Kelly.
“This may force many more taxpayers into self assessment. It is essential that HMRC systems are able to cope with this increased demand.”
Double taxation is another area of concern, Kelly added, stressing the need for double taxation agreements signed by the UK treat Scottish income tax in the same manner as UK income tax.
“It is not only new Scottish taxes that could lead to double taxation, but also new UK taxes. Therefore, this process needs to consider, in addition, new taxes proposed by the UK government, she said, before highlighting concerns about the “uniquely complex system” faced by taxpayers in Scotland, whose savings income will be subject to UK tax rates, while other income is set to be subject to Scottish rates.
“If the Scottish government decides to set different rates and thresholds for local income tax from those for the UK, it would result in a great deal of complexity for Scottish taxpayers to understand their calculations and liabilities,” said Kelly.
