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The Tax Case Against Scottish Independence

10 July 2013   (0 Comments)
Posted by: Author: Amanda Banks
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Author: Amanda Banks

As Scotland prepares for next year's referendum on independence, a new UK Government report on Scotland's business and microeconomic framework has outlined what it sees as the potential tax consequences should Scotland choose to leave the UK. The report, which was prepared by the Department for Business, Innovation and Skills, makes the case that Scotland benefits from a unified corporation tax regime and a single tax authority, and warns of extra costs for drivers and for alcoholic drink producers.

Noting recent reductions in UK corporation tax – down from 28 percent in 2010 to 23 percent today, with a further three percent drop planned by 2015 – the document argues that this has been made possible by the "size and diversity of the UK economy and tax base," and that Scottish Government promises to reduce the rate in Scotland "cannot be guaranteed" given the intention of retaining a currency union. Extra compliance rules will include multiple filings and the need to apply international tax rules, including transfer pricing rules, and businesses in Scotland would no longer benefit from tax reliefs. These reliefs include new "Patent Box" rules, above the line R&D tax credit, and reliefs for the creative industries.

The report further warns that Scottish Capital Gains Tax legislation may create the potential for double taxation, and that Scotland would have to renegotiate VAT exemptions with the EU on items such as food, children's clothing, and new dwellings. Further, a new HGV charging rule would no longer be cost neutral, requiring Scottish HGV drivers to pay up to GBP10 a day to use UK roads, and bringing non-commercial vehicles into the UK for longer than six months would incur a registration fee and vehicle excise tax. As regards alcohol, new administrative systems will have to be set up to pay and reclaim duty each time a product crosses the border or new warehouses either side of the border, and to ensure fiscal duty stamps are present.

The document also considers the cost of setting up a new revenue collection body, estimating it to be up to GBP562m. Due to economies of scale, it is further estimated that the body would cost between GBP575 and GBP625m per year to run, against the equivalent of GBP302m that HMRC currently costs in Scotland (based on a per capita cost of GBP57).

The report has received the support of the opposition Labour Party. Shadow Business Minister Ian Murray MP was quoted as saying that it "shows the vast array of networks, markets, regulations and resources that bring huge benefit to Scotland but that crucially, whose risks and liabilities are shared across the UK.

"However, the Scottish National Party, which has the majority in the Scottish Parliament, has mocked the document as a product of an anti-independence "Project Fear," and has called for it to be withdrawn. Deputy First Minister Nicola Sturgeon described it as "misleading and inaccurate."


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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