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Advisers warn of employer headache as Scots income tax looms

HAVE YOUR corporate clients set up payroll to deal with the impending Scottish rate of income tax? The question is one that advisers must broach with their clients, their accounting peers have warned.

The new rates, which will apply to workers that live in Scotland, will be proposed later this month and apply from 6 April 2016.

While the onus is on HMRC and employees to decide the appropriate tax jurisdiction, employers will need to make sure their payroll software is in order to deal with the change. The taxman will let them know who the Scottish taxpayers will be – and an ‘S’ will be added to the start of their tax code.

Various forms and payslip will need amending, while HMRC’s employer guidance states: “You’ll need to adjust your IT systems to collect the right amount.”

RSM’s head of tax in Scotland, Stephen Hay, has warned that the change will place “important administrative burdens” upon employers.

“All employers with Scottish resident employees – or even a single worker living in Scotland – will still need to be set up to deal with the new regime and have payroll software which can cope with the new codes,” said Hay.

“It is also likely that employers will have to respond to queries from their staff, and deal with the inevitable teething difficulties that the introduction of the new rate will bring – particularly in the event that the Scottish government decides to raise or lower the rate.”

There have been concerns about the Scottish government’s ability to manage the transfer of control.

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