The Scottish Government has responded to its consultation on its approach to the planning, management and implementation of fully-devolved taxes in Scotland (Land and Buildings Transaction Tax and Scottish Landfill Tax), with the aim of bringing greater transparency and efficiency to the process, and broader engagement with taxpayers and the accountancy profession.

Other than the Scottish Budget, there is no formal process or structure in place to guide the consideration, analysis and implementation of legislative change for the devolved taxes. The Scottish Government received representations from stakeholders on the current process and considers this to be an appropriate time to establish a framework to bring greater certainty, transparency and efficiency to the tax policy making process.

Set out below is a brief overview of the taxation powers available to the Scottish Government.

Scottish Income Tax

The Scotland Act 2016 provided the Scottish Parliament with the power to set the rates and band thresholds that apply to all non-savings non-dividend income tax paid by Scottish taxpayers. While the Scottish Parliament has the power to set the Scottish Income Tax rates and bands, HMRC continues to be responsible for its collection and management. As such, Scottish Income Tax remains part of the existing UK income tax system and is not a fully devolved tax.

Assigned VAT Revenues

The Scotland Act 2016 also allows for receipts from the first 10p of the standard rate of VAT and the first 2.5p of the reduced rate of VAT in Scotland to be assigned to the Scottish Government. The power to set the VAT rates and determine the tax base will remain reserved to the UK Government so VAT is not a fully devolved tax.

Local Government Taxes

Council Tax and non-domestic rates, also known as business rates are two other forms of taxation in Scotland. The Scottish Government is responsible for the policy and legislative framework for these taxes, however individual local authorities administer and collect them. The 2019-20 Scottish Budget delivered additional powers to local authorities to introduce taxes on workplace car parking spaces and tourism. These proposals will be developed through close consultation with the public, industry and local authority partners. It will then be for each local authority to decide whether to introduce these powers.