Devolution of tax powers to Scotland could overstretch HMRC

DEVOLVING GREATER tax-raising powers to Edinburgh could see HM Revenue & Customs thinly-spread and potentially overstretched, according to ICAEW.

Requiring HMRC to administer differing rates at a time of limited and decreasing resources for the taxman could lead to problems, head of ICAEW’s tax faculty Frank Haskew told the Treasury Select Committee.

He added that the institute would “whole-heartedly” support the devolution of powers, provided the changes are “practicable for HMRC, without sacrificing service quality”.

“With HMRC under increased pressure to do more with less, our chief concern is that Scottish devolution of tax is achieved without compromising HMRC’s capabilities,” Haskew said.

“HMRC has limited resources and its budget and headcount continue to be reduced, the most recent example being the latest round of office closures [in which it was announced 14 offices would close].”

Scotland is already due to gain power to alter the basic rate of income tax above 10p in the pound from 2016, and to take charge of some minor taxes such as stamp duty, under the Scotland Act 2012. Control over these powers would be extended under the pledge.

Its own tax authority, Revenue Scotland, was announced in 2012, with responsibility to levy and collect stamp duty land tax and landfill tax from next year could have its remit broadened, Haskew said, in order to relieve some pressure on HMRC.

“This would come with its own set of issues, including the prospect of some individuals having to routinely deal with two different tax authorities. Again the expense of this, both to set up and run on a day-to-day basis, should not be underestimated,” He warned.

“The hardest taxes to devolve are also those that raise the most revenue, and devolution of these will make our tax system more complex, not simpler, a promise that this government has yet to deliver,” he said.

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