In the run-up to the vote on Scottish independence, the chancellor set out measures to incorporate upcoming changes to legislate for new powers for the Scottish government to raise income tax.
The Budget contained details of amendments to the legislation on the new Scottish rate of income tax (SRIT), due to be introduced in April 2016, which are designed to make it easier to include a number of technical changes.
The measures will amend the structure of the income tax legislation setting out how the SRIT is applied in calculating the overall rates of tax applicable to the non-savings income of Scottish taxpayers.
HMRC published a technical note in May 2012 looking at how to deal with circumstances where the Scottish rate setting power interacts with other areas of the income tax system such as Gift Aid and pensions tax relief. The Budget briefing note states that in preparing to legislate for these proposals, which relate to amendments made to the Income Tax Act 2007 (ITA), it became clear that this would be a complex issue. The secondary legislation announced by the Chancellor is intended to make this more straightforward.
Legislation will be introduced in Finance Bill 2014 to remove section 6(2A)-(2C) of the ITA and the amendments made to section 10 by the Scotland Act 2012 and replace these by inserting new sections 6A and 11A into ITA. These will set out the Scottish basic rate, Scottish higher rate and Scottish additional rate, how each is calculated, and the income charged at these rates.
The calculation of these rates will remain unchanged. But the structure of the provisions is changed so that they apply as needed elsewhere in the Income Tax Acts, and so that consequential amendments can be applied by order under section 80G of the Scotland Act 1998 to implement the changes consulted on in the May 2012 technical note.
In the Budget, the Chancellor also announced that the government will legislate to require the National Audit Office (NAO) to report annually to the Scottish Parliament on HMRC’s administration of the SRIT.
Other Budget measures of particular interest to Scotland include a freeze the duty on spirits for 2014-15 which the Chancellor said was to support the Scotch whisky industry, and an exemption for non-UK resident sportspeople competing in the athletics event the Glasgow Grand Prix 2014 to be held 5-14 July 2014.
