The Scotland Bill received royal assent on 1 May 2012, making it the Scotland Act 2012. The new Act introduces, what has been described as, "the biggest transfer in fiscal power to Scotland in more than 300 years" and includes: devolved powers for setting speed limits, drink driving limits and controls over air weapons; the power to raise taxes in land transactions and on waste disposal to landfill; and, borrowing powers for Holyrood. Other changes, which may have a significant impact on all of us, are the devolution of the power to set income tax and the abolition of Stamp Duty Land Tax and replacement with the perhaps less snappily titled "Scottish tax on transactions involving interests in land".
Section 25 of the new Act amends the Scotland Act 1998 to provide that 'the Scottish Parliament may by resolution set the Scottish rate for the purpose of calculating the rates of income tax to be paid by Scottish taxpayers.' These resolutions apply for one year and can only specify one rate of income tax.
The new rate of income tax applies to "Scottish Taxpayers". The new Act defines a Scottish Taxpayer as an individual who is (a) resident in the UK for tax purposes AND (b) who meets either of the set out criteria. This criteria includes: the individual having a close connection with Scotland; spending more days of a year in Scotland than in any other part of the UK; or, being a member of Parliament for Scotland. A Scottish Taxpayer must be an individual (i.e. a human being) and therefore does not affect tax rates for companies, trusts and charities. Saying that, the new rate could open up interesting opportunities and issues where, for example, there is interaction between trust rates of tax and individual rates of tax.
As for the new rate itself, section 26 provides that the income tax for Scottish Taxpayers will be the UK-wide basic rate, higher rate or additional rate, followed by a deduction of 10 percentage points, plus the Scottish rate set by the Scottish Parliament for that year.
In respect of taxes relating to land, section 28 of the new Act provides that 'a tax charged on the acquisition of an estate, interest, right or power in or over land in Scotland' is a devolved tax. Section 29 then provides that UK Stamp Duty Land Tax will be disapplied in Scotland.
Whilst these appear to be significant changes, it should be noted that these powers will not transfer until 2015/16. There are of course potential developments ahead of that date.
Click here to download the Scotland Act 2012 legislation.
For further information on the personal taxation aspects of the Scotland Act, please contact;
0141 271 5375
For further information on general parliamentary law and matters, please contact;
0131 228 7121
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This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.