Scottish taxpayers to be defined by place of home

THE DEFINITION OF a Scottish taxpayer will be determined by an individual’s home and not their place of work, the Scotland Bill confirmed this week.

The Bill says that UK residents who live in Scotland will be determined as a Scottish taxpayer and be eligible to pay income tax rates set by the devolved government even if they work elsewhere. People with more than one place of residence in the UK will be treated as a Scottish resident if the number of days spent in Scotland is more than in any other single place in the UK. Days will be determined by where they spend the end of the day, including on transport vessels.

Matt Coward, a partner at Price Bailey, said that the simplicity of the definition could lead it open to abuse. “It seems to me that it would be easier to use the same test proposed for UK residency. The Scottish one is simpler but it will be easier to exploit. This matters because the Bill allows Holyrood to raise taxes. This could be the first stage and if Scotland gets more powers, it will matter even more.”

Steve Wade, employment tax director at KPMG, said that the stipulations in the Bill are “straightforward”, but said more work was needed on the situation for people moving country during the financial year.

“It isn’t clear what would happen to PAYE if you moved part way during the year,” he said. “If you move after three months to Scotland you would be a Scottish taxpayer for the whole year. Would you therefore have to make up the difference if the Scottish rate was higher by filing a return?”

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