Scotland enters brave new tax world

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Donald Drysdale
Freelance author
Taxing Words Ltd
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Donald Drysdale comments on the new fiscal framework negotiated between the Westminster and Holyrood governments.

Agreement reached

After protracted negotiations behind closed doors, the UK and Scottish governments announced on 23 February that they had reached agreement on a new fiscal framework to underpin the further powers over tax and welfare now being devolved to Scotland.

‘The agreement between the Scottish Government and the United Kingdom Government on the Scottish Government’s fiscal framework’ finally reveals what has been decided.  The need for this fiscal framework was explained in our article ‘Scotland’s devolved taxes: A never-ending story’.

Tax powers

Given the slow progress of the Scotland Bill, there had been speculation about whether Holyrood’s new, wider powers over income tax rates and thresholds would be introduced in 2017 or 2018. The governments have agreed that this should happen on 6 April 2017.

The Scottish government will retain all devolved and assigned Scottish tax revenues. Revenues from tribunals and courts in Scotland will be retained by the Scottish government from April 2017. Air passenger duty is to be devolved in April 2018, and the devolution of aggregates levy will begin once current legal issues relating to state aid and other matters have been resolved. The assignment of VAT revenues will be implemented in 2019/20.

Dates for devolution of welfare responsibilities have still to be agreed by the Joint Ministerial Working Group on Welfare, which was set up last year by the UK and Scottish governments.

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