Scottish people living outside the UK are at risk of paying the incorrect tax as a result of confusion over whether they should be treated as Scottish or UK taxpayers, the Association of Taxation Technicians (ATT) warns
Scottish taxpayers already face losing out because the threshold between the basic rate band and the higher rate band is set at £43,000 for those entitled to the personal allowance in Scotland, compared to £45,000 in the rest of the UK.
Under devolved powers, Scotland is able to vary the rates of Scottish income tax (SRIT) by up to 10% from those set by the government in Whitehall. In England, the higher rate 40% income tax threshold is due to rise to £45,000.
In all, around 300,000 Scottish taxpayers will pay more than their counterparts south of the border as a result.
HMRC regulations state that if a Scottish person is classed as a non UK resident, they should be regarded as a UK taxpayer and not a Scottish taxpayer.
However, if HMRC holds a Scottish address for a non-UK resident, the ATT has warned that HMRC may incorrectly determine them to be liable for Scottish rates of income tax.
HMRC uses the address it holds for a taxpayer as the identifier as to whether they are a Scottish or UK taxpayer.
To correct this, HMRC insists on an overseas address being supplied as the main address and will leave, on request, any Scottish address held as a correspondence address. This can create difficulties when the individual is in temporary accommodation abroad and has no fixed address overseas.
Yvette Nunn, co-chair of ATT’s technical steering group, said: ‘We would urge relevant individuals or their advisers to contact HMRC to give an overseas address and perhaps ask that they keep the Scottish address as a postal address only. Otherwise the risk is their tax return will be rejected and they may pay more tax than they should because of an assumption that they are a Scottish taxpayer rather than a UK taxpayer.
‘The system does not adequately cater for those that cannot provide an overseas address, for example someone who is travelling for a long period. In those circumstances they are unable to provide details of an overseas residence. HMRC needs to move with the times and it needs to be possible to have an address that is a contact address while they are abroad rather than a place of residence.’
