Scottish Parliament passes legislation establishing Scotland’s first tax collection system for 300 years

Legislation which will establish and govern Scotland’s first tax collection system in 300 years has been passed by the Scottish

Legislation which will establish and govern Scotland’s first tax collection system in 300 years has been passed by the Scottish Parliament.21 Aug 2014

The Revenue Scotland and Tax Powers Bill establishes Revenue Scotland as the authority responsible for collecting and managing the taxes devolved to the Scottish government, which will come into effect on 1 April 2015. It also contains a “robust and distinctive” new anti-avoidance rule, intended to counteract artificial arrangements designed to gain a tax advantage.

“This Bill is an important milestone which provides an opportunity to put in place a distinctive Scottish approach to taxation founded on Adam Smith’s four principles – that taxes should be proportionate to the ability to pay, that there must be certainty, convenience for the taxpayer and efficiency,” said John Swinney, the Scottish government’s finance secretary.

“I am determined that Revenue Scotland will combat tax avoidance as vigorously and effectively as possible, and the Bill contains a wide-ranging General Anti-Avoidance Rule (GAAR) which will allow Revenue Scotland to take robust counteraction against artificial tax avoidance schemes – not just the most abusive end of the spectrum,” he said.

The bill is one of three pieces of legislation introduced under the 2012 Scotland Act, which gave the Scottish parliament powers to both set and collect a portion of its own revenue from April 2015. It will establish Revenue Scotland as the tax authority responsible for collecting and managing two newly-devolved taxes which will be introduced from that date, as well as any future new devolved taxes. These are Land and Building Transaction Tax (LBTT), which will replace stamp duty land tax (SDLT) in Scotland; and a new Scottish landfill tax.

The bill also sets out the powers and duties of the new Revenue Scotland, including its ability to delegate some functions to Registers of Scotland and the Scottish Environmental Protection Agency (SEPA). Revenue Scotland will not be responsible for the collection of existing locally-collected taxes, including council tax and non-domestic rates; and will not collect the Scottish rate of income tax, which is due to be administered by HM Revenue and Customs (HMRC) from April 2016.

The GAAR contained in the new legislation differs from that introduced in the UK in April 2013. The Scottish GAAR will counteract artificial arrangements designed to gain a tax advantage; while the UK GAAR is designed to prevent taxpayers from receiving tax advantages as a result of tax arrangements that are “abusive”. HMRC defines “abusive” arrangements as those that it can show “cannot be reasonably regarded as a reasonable course of action”.

Swinney said that the Scottish government’s GAAR would “ensure that all tax that should be paid is paid”.