In the run-up to the referendum on 18 September, John Watkins, senior partner at Dickson Middleton, considers the impact of a yes vote on PAYE, employment taxes and residency issues in an independent Scotland
In my last article I grazed the surface on VAT in an independent Scotland, so let us touch on employment taxes in an independent Scotland. There are a few considerations:
The first consideration has to rest with the individual and how independence would affect them. The fundamental issue on this point would be to determine their residence for income tax purposes and whether they pay income tax in rUK [rest of UK], an independent Scotland or both!
Residency
The following HMRC residence test guidance is a good starting point in determining which side of the border an individual’s tax residence would be:
- Booklet RDR1 (Guidance Note: Residence, Domicile and the Remittance basis) covers rUK tax liabilities and rights to rUK income tax exemptions and allowances, the employment aspect of which is summarised in the table below.
- Booklet RDR3 (Guidance Note: Statutory Residence Test (SRT)) covers the rules which determine tax residence which can be readily tested through the on line Tax Residence Indicator tool at http://www.hmrc.gov.uk/calcs-tools/
| rUK residence status for income tax and liability arising to rUK income tax | Individual resident for rUK income tax | Individual non-resident for rUK income tax |
Employment duties performed wholly or partly in the UK |
